The deal values WeWork at an initial enterprise value of approximately $9bn and the transaction will provide the company with $1.3 billion in cash to fund its growth plans into the future.
The transaction itself will be funded with BowX’s $483m of cash in trust in addition to a fully committed $800m private placement investment at $10 per share led by investors including Insight Partners, funds managed by Starwood Capital Group, Fidelity Management & Research Company LLC, Centaurus Capital and funds and accounts managed by BlackRock.
WeWork CEO Sandeep Mathrani, who assumed the role last year, provided further insight on the company’s transformation over the past year in a press release announcing the merger, saying:
“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.”
WeWork has made significant progress in transforming its business since 2019 when it enacted a strategic plan which included robust expense management efforts, exits of non-core businesses and material portfolio optimization.
Over the course of last year though, the company improved its free cash flow by $1.6bn through cost cutting measures that included reducing SG&A expenses by $1.1bn and trimming building operating expenses by $400m. At the same time though, WeWork also exited all of its non-core ventures and streamlined its headcount by 67 percent.
In December of 2020, the company exited 106 pre-open or underperfoming locations and executed over 100 lease amendments for rent reductions, deferrals or tenant improvement allowances which resulted in an estimated $4bn reduction in future lease payments. Enterprise companies now also make up more than 50 percent of WeWork memberships, up from just 10 percent in 2015.
WeWork and BowX’s merger has been unanimously accepted by the boards of both companies and the deal is expected to close by the third quarter of this year.
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