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WeWork 'accepts takeover by Softbank' WeWork rescue 'hands co-founder Adam Neumann $1.7bn payout'
(about 3 hours later)
Japanese investment giant Softbank is set to take control of WeWork after the office sharing firm's plans to raise money via stock markets collapsed. Struggling property firm WeWork has reportedly accepted a rescue deal with a generous payout for controversial co-founder Adam Neumann.
WeWork's board has reportedly accepted an offer in which Softbank will buy billions worth of shares, including $1bn from co-founder Adam Neumann. The deal will see current investor, Japanese firm Softbank, buy billions more dollars worth of WeWork shares, including almost $1bn from Mr Neumann.
The rescue deal provides much needed cash to WeWork. The agreement, which also includes $5bn in debt financing, gives Softbank control of the company.
However, the agreement values the firm at about $8bn (£6.1bn) - a fraction of previous valuations. It follows the collapse of WeWork's plans to raise money via stock markets.
Softbank, which already owned about a third of WeWork, had earlier valued the firm at nearly $50bn. The Wall Street Journal first reported terms of the rescue plan.
Reports say that in exchange for his shares, a $185m consulting fee and a credit line, Mr Neumann agreed to back the rescue plan over a rival offer from JP Morgan. He is also expected to step down from WeWork's board. It is said to value WeWork at about $8bn (£6.1bn), a sharp comedown from the nearly $50bn Softbank estimated when it invested in WeWork previously.
The Wall Street Journal first reported terms of the deal. The Japanese investment giant, which already owned about a third of WeWork, has now spent about $19bn on the firm - more than double the firm's current valuation, according to Reuters.
Mr Neumann was forced out as chief executive last month after WeWork's share offering ran into trouble, as investors questioned his leadership and the firm's mounting losses. Reports said that Mr Neumann agreed to back the rescue plan over a rival offer from JP Morgan, in exchange for his shares, a $185m consulting fee and a $500,000 credit line. He is also expected to step down from WeWork's board. He will retain a smaller stake in the company.
The company, which rents out office space, has grown from a single office in New York City to more than 500 locations around the world. But it lost about $900m in the first six months of this year. 'Significant chunk of cash'
Ronn Torossian, chief executive of the public relations firm 5W PR, called the exit package a "win" for Mr Neumann, who was forced out as chief executive last month after WeWork's planned flotation ran into trouble.
"Many CEOs who get pushed out of the company they founded don't exit with a billion dollars plus in cash," he said. "It clearly shows that while Neumann was not right to lead the company at the time, his contributions were large enough to warrant a significant chunk of cash."
WeWork, which rents shared office space and helped to popularise co-working, has grown from a single office in New York City to more than 500 locations around the world. But it lost about $900m in the first six months of this year.
The firm's share offering received a lukewarm reaction from investors, who raised concerns about the firm's financing and governance. WeWork officially dropped the flotation plan last month.
The company is now said to be preparing job cuts and sales of parts of the business in an effort to right its finances.