Coverage: Buffett proposed investing $3 billion in Uber

Warren Buffett proposed investing $3 billion in Uber Technologies Inc. earlier this year, but the talks fell apart following disagreements over the terms and size of the deal.

Eric Newcomer and Olivia Zaleski of Bloomberg News had the story:

The now-dead Uber transaction is reminiscent of the winning bet Buffett’s Berkshire Hathaway Inc. made on Goldman Sachs Group Inc. during the financial crisis. Buffett invested $5 billion in Goldman Sachs, lending his imprimatur to the bank when it was reeling after the collapse of rival Lehman Brothers Holdings Inc. in late 2008. In exchange, Buffett’s company got preferred stock that ultimately netted Berkshire more than $1.6 billion in profit. Berkshire also got warrants to buy Goldman stock that produced an even bigger gain.

Buffett proposed similar terms to Uber in the wake of a crisis of the ride-hailing company’s own making. Buffett would have effectively lent Uber his sterling reputation, along with some capital, in exchange for cushy deal terms. A spokesman for Uber declined to comment. Buffett did not immediately respond to a request for comment left with an assistant.

Under the proposed agreement, Berkshire Hathaway would have provided a convertible loan to Uber that would have protected Buffett’s investment should Uber hit financial straits, while providing significant upside if Uber continued to grow in value, said the people, who spoke under condition of anonymity because the discussions were private. Buffett’s initial offer was well above $3 billion, one of the people said.

Marco della Cava of USA Today reported that Buffett is a fan of Uber’s CEO:

Buffett, the chairman of Berkshire Hathaway, confirmed to CNBC Wednesday that earlier this year he had discussed a sizable investment in Uber with its new CEO Dara Khosrowshahi, who is in the middle of rebranding the embattled company.

“I’m a great admirer of (Khosrowshahi),” Buffett said. “Some of the reported details are not correct but it’s true that Berkshire had discussions with Uber.”

The proposed deal, first reported by Bloomberg and The Wall Street Journal, citing unnamed sources, had echoes of Buffett’s $5 billion bet on Goldman Sachs during the depths of the 2008 financial crisis.

Sara Salinas of CNBC.com reported that Uber tried to talk Buffett into a smaller stake:

Uber and Berkshire Hathaway disagreed on the terms and size of the deal, according to the report, so Uber tried to talk Buffett into a smaller stake.

SoftBank bought in at a valuation of $48 billion, a discount from the $66 billion that Uber was once said to be worth. Uber last week announced first quarter results and a tender offer that nudges its valuation past $60 billion.

The company has been in the middle of a reputational turnaround since its controversial founder Travis Kalanick was ousted last year. Khosrowshahi has emphasized rider safety, driver rights and better governmental relations in his 10 months as CEO.

A Berkshire investment would have served as something of a stamp of approval for Uber ahead of an eventual IPO. Buffett sent Apple’s stock soaring earlier this month when he revealed a massive stake in the hardware giant.