Plan to sell stake in India unit collapses; sector revival, valuation issues hit transaction
WeWork Inc.’s plan to sell its 27 per cent stake in the Indian unit and exit the country has collapsed, according to three people aware of the matter. This comes after the Competition Commission of India (CCI) had approved the proposal, reports The Economic Times.
Along with the bankruptcy-hit WeWork Inc., the coworking firm’s local partner WeWork India, promoted by Bangalore-based realtor Embassy Group, was also slated to divest a 13 per cent stake to a consortium of investors including the Enam group family office, A91 Partners and CaratLane founder Mithun Sacheti in a Rs 1,200 crore secondary transaction. The Indian real estate group holds 73 per cent in the India unit while WeWork Inc. owns the rest.
The deal cleared by the regulator, as per a June 18 order, involved a two-step process that was to see WeWork Inc. and Embassy together selling a stake of about 40 per cent to new investors.
“The transaction didn’t go through due to a valuation mismatch even after the regulatory nod came in from the Indian antitrust body,” said one of the persons cited. The Embassy Group was supposed to acquire the 27 per cent stake held by WeWork US in the India business and subsequently bring in investors as the company prepared a plan to go public.
Karan Virwani, CEO of WeWork India, is holding talks with 360 One, formerly IIFL, to buy some part of the 27 per cent stake held by WeWork Inc in the Indian unit, according to the people cited above.
“Embassy will pick up financing from 360 One by leveraging their shareholding,” the person said on condition of anonymity as the talks are private.
The development comes on the back of a successful public offering by WeWork India’s rival Awfis in May signalling a turnaround in the sector. The Rs 600 crore Awfis IPO was oversubscribed 108 times. The company’s share price has shot up over 83 per cent since listing compared from its issue price of Rs 383.
“The selling party did not want to go ahead at the agreed valuation seeing the kind of demand generated by the Awfis listing and the overall buoyancy in the public markets,” said one of the persons cited above.
With a new WeWork US management in place, there could be a change in strategy for the India market, said a person close to the matter. Softbank-backed WeWork Inc. was co-founded by Adam Nuemann and Miguel McKelvey. It filed for banckruptcy in the US last November and appointed John Santora as chief executive in June.
This is the second major deal in the new economy space that has fallen through in recent times having obtained CCI clearance after National Investment and Infrastructure Fund’s planned investment in FirstCry.
