SoftBank nears first closing of $100bn tech fund

Bloomberg

SoftBank Group Corp. is aiming to close the first round of investment in its planned $100 billion technology fund by the end of this month, giving Chief Executive Officer Masayoshi Son an enormous war chest to go on the hunt for deals, according to people familiar with the matter.
The initial investments will likely include $45 billion from Saudi Arabia and $25 billion from SoftBank, as well as $1 billion each from Apple Inc., Qualcomm Inc. and Oracle Corp. Chairman Larry Ellison, the people said, asking not to be identified because the matter is private. Abu Dhabi investor Mubadala Development Co. may join the first round, though it could also wait until a later time, they said. The initial round is likely to exceed $80 billion and the timing of the closing may still change, said one of the people. It’s not yet clear when the remainder of the planned financing would be raised.
Son announced plans for the Vision Fund in October, vowing to become the biggest investor in the technology industry over the next decade. He has already been among the most acquisitive, buying Sprint Corp. for $22 billion and ARM Holdings plc for $32 billion along with stakes in hundreds of startups. The new fund will give him cash to cut even larger deals as he aims to capitalize on emerging trends like artificial intelligence and the so-called Internet of Things.
“When I first founded this company, all I could think about is how to stretch the finances until the end of the month,” Son said Wednesday after his company’s earnings announcement. “Recently, the span shifted to 10 and 30 years ahead. I’m now seriously thinking about how to make sure that SoftBank group can grow for the next 300 years.”
A spokesman for SoftBank declined to comment. Son said the fund is in its “final stages.” The 59-year-old billionaire is finding renewed energy after long saying he planned to retire in his 60s. Last year, he publicly changed his mind and said he wants to remain in charge indefinitely, leading to the departure of his one-time heir apparent Nikesh Arora.
SoftBank may announce deals within days of the fund’s first closing, one of the people said. The company has had preliminary discussions to make an investment in WeWork Cos., a New York-based startup for sharing office space, said the people, cautioning a deal may not be finalized. WeWork, with more than 140 locations around the world, was most recently valued at $16 billion. SoftBank has also agreed to invest $1 billion into OneWeb Ltd., a startup based in Exploration Park, Florida that aims to provide internet connectivity from satellites. Son said on Wednesday that the deal would go into the new fund.
“All the vision in the world is for naught when you don’t have finances,” said Satoru Kikuchi, an analyst at SMBC Nikko Securities Inc. “The fund is a great scheme, considering the limitations of SoftBank’s balance sheet. It could be much more than an investment vehicle, becoming an embodiment of Son’s philosophy.”
Son built his reputation making risky bets in telecommunications and technology. He bought the third-largest wireless operator in Japan, turning it into a fierce competitor for the market leaders. He also backed startups such as Alibaba Group Holding Ltd., putting an initial $20 million into the Chinese e-commerce company for a stake that exceeded $70 billion.
He is assembling the Vision Fund because he sees even greater opportunities ahead. He cited as examples the leaders of the so-called sharing economy, Uber Technologies Inc. and Airbnb Inc. “Uber is redefining the transportation industry now; Airbnb is doing it to the hotel industry. You can expect that to happen in every single industry,” he said Wednesday. “There is a big bang coming and it’s too good of a chance to pass up. We need to be in a position to face it head on. SoftBank Vision Fund’s role is to get us there.” Son’s focus may well be the US after he met with President Donald Trump in December and pledged to create 50,000 new jobs by investing $50 billion in startups and new companies. He said OneWeb and Sprint will add about 8,000 jobs, contributing toward that goal.
Son hasn’t given many details on how the fund will be deployed, once it is raised. It is likely to be a mixture of many investments on the scale of OneWeb with a handful of very large deals. “This won’t be a typical fund,” he said. “Most of our investments will range between 20 and 40 percent, making us the largest shareholder and board member, in a position to discuss strategy with the founders.”
Son has said that the ARM acquisition last year, his largest ever, is aimed at capitalizing on the Internet of Things, or the idea of integrating computer technologies into everything from refrigerators to roads and clothes. He also sees promise in bringing the internet to regions of the world that haven’t been connected yet. That was part of the attraction to OneWeb, which is aimed at using satellites to provide coverage in remote areas.
“It’s been said that the capital investment to connect the last two percent of the world’s population requires the same investment made to connect the 98 percent,” he said Wednesday. “That’s why telecom companies have abandoned this market. Satellite is the technology to make that connection.”