Exclusive: SoftBank to buy partial stakes of Sequoia, Lightspeed & Greenoaks in OYO

OYO has been expanding globally at a very quick pace and requires periodic fund-infusion. While the firm has been exploring a new investor to lead the Series F round as per reports, sources privy to matter emphasised that SoftBank is in advanced conversation to lead up to $1.5 billion investment in OYO.

“The round would be a mix of secondary and primary transaction where SoftBank would also be buying stakes from OYO’s minority stakeholders,” said three sources aware of the ongoing transaction that is only a few steps away to get through.

Sequoia Capital, Lightspeed, and San Francisco-based Greenoaks Capital will partially exit from OYO. The trio are expected to score hefty multiples in the secondary round.

They co-invested in a $25 million Series A round in early 2015 in the now world’s sixth largest hotel chain.

According to sources, the new round lead by the Japanese conglomerate would be valuing OYO over $10 billion. “The valuation could be in the range of $10-11 billion,” added sources. The fresh financing round will also see participation from new investors as well. 

Name of new investors participating in the round couldn’t be ascertained by Entrackr. Last month, TOI reported that OYO is raising new round at a valuation of $10 billion.

The report of SoftBank leading the round and acquiring partial stakes of Sequoia and Lightspeed has come at a time when a separate TOI report mentioned those minority investors and OYO’s founder Ritesh Aggarwal had voted for a clause set in Article of Association in 2017 that barred SoftBank from acquiring more than 50% stake in the company.

It’s not known whether SoftBank would cross 50% equity mark in OYO. However, sources said that it will not breach the AoA.

Entrackr had learned about SoftBank’s plan to buy the stake of minority investor several months ago. The AoA clause dated back in 2017 only goes on to explain why SoftBank has kept a keen eye on this arrangement.

Sources also confirm the same. 

“Conversation between SoftBank and minority investors have been underway since February this year. There has been resistance from Sequoia, Lightspeed, and Greenoaks for selling stakes to SoftBank. However, somehow they arrived at a consensus,” mentioned sources. 

Meanwhile - a fair question at this point - is 28 months old AoA still in a place that bars taking more than a half of OYO? Well, we don't know and have to wait for details.

It’s worth noting that this investment will be meant for India and global expansion (except China). OYO China is a separate entity and has been scouting an independent fundraising plan.

Amidst the resistance of minority investors, OYO was in need of a funding round to continue its momentum in global markets. “Since it was taking time to find a new backer to lead over a billion USD  worth fresh financing round, they along with Aggarwal agreed to SoftBank’s offer - a mix of primary and secondary equity acquisition,” outlined sources.

A detailed questionnaire sent to SoftBank, OYO, Lightspeed, and Sequoia separately didn’t elicit an immediate response while Greenoaks couldn’t be contacted immediately. We will update the post as responses come in.