Temasek Said in Talks to Buy Majority Stake in WeWork China

WeWork China’s Shanghai locations are said to be 35% vacant

Singapore’s Temasek Holdings, together with Shanghai-based investment manager Trustbridge Partners, has offered to buy up a majority stake in the China operations of troubled flexible office operator Wework, according to a report by Reuters today.

The Singapore government fund and its mainland partner submitted a proposal for the buyout of WeWork China to Softbank at the end of last year, according to Reuters, which based its report on information from three sources familiar with the discussions.

In early November WeWork began surrendering leased spaces in Hong Kong amid reports of low occupancy across the company’s Greater China operation, while globally the company has been selling off ancillary businesses and announced layoffs of around 20 percent of its work force in late November.

Investing at an 80% Discount

The proposal by Temasek and Trustbridge values WeWork China at around $1 billion, according to the Reuters report, which did not specify the size of the stake that the Singaporean fund and its partner intend to acquire. The discussions are said to still be in the early stages, with no certainty of a deal being reached.

WeWork Asia vice-chair Christian Lee may be selling shares at an 80% discount

Both Temasek and Trustbridge had participated in a $500 million fund raising round for WeWork China in 2018 which valued the company at $5 billion. That financing came after the mainland operation was spun off as a separate entity in a $500 million investment exercise led by Hony Capital and Softbank in 2017.

At present, WeWork owns 59 percent of its China business, with Softbank, Hony and Trustbridge, along with other investors, owning the remaining 41 percent, according to the prospectus filed as part of WeWork’s failed IPO attempt last year.

In response to inquiries from Mingtiandi, representatives of both WeWork and Temasek Holdings declined to comment, while Trustbridge had not yet replied by the time of publication.

Bailing Out a Struggling Mainland Operation

While Softbank bailed out WeWork in October with a $9.5 billion financing package after investors shunned the company’s IPO attempt, the co-working pioneer is still struggling to achieve profitability. At the same time WeWork’s Softbank stablemate Oyo Hotels, has already been forced to curtail its loss-making China operation.

Softbank’s efforts on behalf of WeWork also hit an obstacle in late December when three of Japan’s largest banks declined to extend further credit to the Japanese tech investor.

In October a report in the Financial Times found that WeWork’s Shanghai locations were over 35 percent empty, while vacancy rates in Xi’an reached as high as 78.5 percent.

At the time, WeWork was said to be looking for opportunities to close China locations, while in recent weeks competing flexible office providers having indicated to Mingtiandi that WeWork centres on the mainland have been made available for takeover.