WeWork is to become a public traded company via a SPAC merger with BowX Acquisition Corp.
The flexible office provider, which failed at an IPO in 2019, is now finally making its way to the public markets via an acquisition by blank cheque company BowX.
The transaction implies a pro forma initial enterprise value of approximately $9bn (£6.5bn) for WeWork – a huge reduction on the $47bn valuation touted for the business.
WeWork said the investment by BowX would enable it to fund its growth plans. It will receive around $1.3bn, including a fully committed $800m private placement investment with key investors including Insight Partners, funds managed by Starwood Capital Group, Fidelity Management & Research Company, Centaurus Capital, and funds and accounts managed by BlackRock, as part of the deal.
WeWork chief executive Sandeep Mathrani said: “WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn. As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever. Having Vivek and the BowX team will be invaluable to WeWork as we continue to define the future of work.”
Vivek Ranadivé, chairman and co-chief executive of BowX Acquisition, added: “This company is primed to achieve profitability in the short-term, but the added long-term opportunity for growth and innovation is what made WeWork a perfect fit for BowX. With a fantastic core business, I see WeWork as a company at an inflection point, with an incredible roster of key members coupled with the vision and leadership to digitise an enormous industry.”
Mathrani and Marcelo Claure, executive chairman of WeWork, will continue to lead the business, with BowX’s Ranadivé and Deven Parekh of Insight Partners joining the board on completion of the deal.
WeWork has been working to right size its portfolio in a bid to become profitable since 2019. Last year it said it had improved its free cash flow by $1.6bn through cost-cutting measures, including reducing expenses by $1.1bn and trimming building operating expenses by $400m. It also exited all of its non-core ventures and streamlined headcount by 67% from its peak in September 2019.
As of December 2020, WeWork had exited 106 pre-open or underperforming locations and executed more than 100 lease amendments for rent reductions, deferrals, or tenant improvement allowances resulting in an estimated $4bn reduction in future lease payments. The firm now has 851 locations in 152 cities around the world.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
