Uber’s self-driving unit secures $1-billion investment ahead of IPO

Ahead of an initial public offering expected next month, Uber Technologies Inc. secured a $1-billion investment in its self-driving unit from three Japanese companies.

Denso Corp., Toyota Motor Corp. and SoftBank Group Corp.’s Vision Fund bought stakes in the unit, valuing the arm at $7.25 billion, according to a statement. The deal will help Uber, which tallied a $3-billion operating loss last year, to continue funding a very costly endeavor.

Uber publicly filed a prospectus to go public last week and is expected to begin a road show to promote the stock before the end of the month. The offering could value Uber at about $100 billion, people familiar with the matter have said. The autonomous-car investment is the second major deal struck in the weeks leading up to the IPO. Uber Chief Executive Dara Khosrowshahi said last month that the company had agreed to acquire Middle Eastern rival Careem for $3.1 billion.

With Uber remaining the majority shareholder in the autonomous-car venture, public investors will still be exposed to a substantial expense. Uber spent $457 million last year on technology investments, including the self-driving-car business. However, the pre-IPO deal will help the company argue that the autonomous program is a valuable component of its business.

The deal is expected to close in the third quarter, Uber said. Together, Toyota and the auto supplier Denso will invest $667 million in the self-driving unit, while the SoftBank Vision Fund will chip in $333 million.

SoftBank was already the largest shareholder in Uber, with a 16% holding. Toyota has a smaller stake. SoftBank hasn’t been able to take two board seats at Uber that were granted as part of its investment more than a year ago. Because of an impending U.S. national security review, SoftBank may never get those seats, but it will have rights to join a new board as part of the autonomous-car deal.

The new corporate entity will have a board composed of six Uber-appointed members, one appointed by Toyota and one from SoftBank’s Vision Fund, a person familiar with the matter said. That seat will also require U.S. security approval.