Singapore Fund Offers $1bn for WeWork China

Singapore state investor Temasek and Shanghai-based private equity firm Trustbridge have moved to secure WeWork China.

According to Reuters, three individuals close to the matter revealed that Temasek and Trustbridge approached WeWork-backer SoftBank Group late last year, submitting a takeover proposal which valued the co-working business at $1 billion (A$1.46bn).

The offer marks a sharp reduction on the $5 billion valuation floated in July of last year, when the Chinese arm of WeWork raised $500 million from investors including Temasek, Trustbridge, SoftBank and Chinese fund Hony Capital.

WeWork currently owns 59 per cent of WeWork China, with the remainder held by other investors including SoftBank, Hony Capital and Trustbridge, according to the group’s prospectus for its initial public offering.

WeWork China accounts for 15 per cent of WeWork's total locations, opening co-working spaces in 125 buildings across 12 cities since its debut there in 2017.

The China division has reportedly been struggling with low occupancy rates and revenue—banking $99.5 million (A$145m) over 2018—as well as fierce competition from local businesses, such as Ucommune, Nash Space and Kr Space—which offer much lower rates.

The move by Temasek follows a tumultuous year for WeWork globally with corporate governance and its relationship of expenses to revenue laid bare.

After years of breakneck growth, cracks started to appear in the office rental company after it publicly filed documents for an initial public offering of shares in August.

Investors were alarmed by steep losses and profligate spending which forced the company to lay off nearly 20 per cent of its employees as a cost-cutting measure.

The failed IPO would eventually push the group's founder Adam Neumann to remove himself from the chief executive job and relinquish his majority control of WeWork’s stock.

The Chinese co-working market is tipped to become the world's largest, reaching 15 million square metres in 2019 compared to 3 million square metres in 2016.

WeWork's largest backer Softbank has continued to bankroll the venture, remains steadfast to its approach.

“We are still in it, we are involved, we are helping the company because we believe the idea at its core is very, very good,” Softbank senior managing partner Deep Nishar said at Munich’s Digital Life and Design conference Saturday.

“We will help solve WeWork’s problems with corporate governance with the next set of management.”