SoftBank Vision Fund to invest $2.25B in GM Cruise
General Motors (GM) announced that the SoftBank Vision Fund will invest $2.25B in GM Cruise Holdings, further strengthening the company’s plans to commercialize AV technology at large scale.
GM will also invest $1.1B in GM Cruise upon closing of the transaction.
“Our Cruise and GM teams together have made tremendous progress over the last two years,” said GM Chairman and CEO Mary Barra.
“Teaming up with SoftBank adds an additional strong partner as we pursue our vision of zero crashes, zero emissions and zero congestion.”
“GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion,” said Michael Ronen, managing partner, SoftBank Investment Advisers.
“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”
The SoftBank Vision Fund investment will be made in two tranches.
At the closing of the transaction, the Vision Fund will invest the first tranche of $900M. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35B, subject to regulatory approval.
Together, this will result in the SoftBank Vision Fund owning a 19.6-percent equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.
The GM and SoftBank Vision Fund investments are expected to provide the capital necessary to reach commercialization at scale beginning in 2019.
GM (GM) Chairman and CEO Mary Barra confirmed the automaker’s plans to launch an autonomous ride-hailing vehicle in 2019.
President Dan Ammann noted that talks with SoftBank occurred over the course of several months. He said GM wasn’t looking for a partner, but found one that was “uniquely aligned” with it.
Ammann added that the Cruise team has grown to over 800 since the acquisition two years ago. He said the decision to report GM Cruise as a standalone segment is intended to enhance transparency around this part of the business.
ANALYST COMMENTS
Evercore ISI analyst George Galliers upgraded General Motors (GM) to Outperform from In Line after SoftBank’s (SFTBF) Vision Fund agreed to invest in the company’s Cruise autonomous driving unit in a deal that values the unit at $11.5B.
Galliers said he had been assigning no value to the Cruise assets before the announcement.
Under his new sum-of-the-parts valuation, Galliers applies a 6.0x multiple on GM’s core, attributes a value of about $8 per share for the Cruise assets and about 60c per share for GM’s stake in Lyft before applying a 25% discount to both of the latter. He raised his price target on GM shares to $50 from $47.
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