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US okays SoftBank's US$2.25b stake in GM's self-driving unit

SoftBank has been under increasing US scrutiny over its ties to Chinese firms


CRUISE, a US self-driving vehicle company majority-owned by General Motors, told Reuters on Friday that a national security panel had approved a US$2.25 billion investment in the firm by Japan's SoftBank.

SoftBank has come under increasing US scrutiny over its ties to Chinese firms in the face of an escalating trade and technology war between Washington and Beijing. It is in the process of raising its second US$100 billion investment vehicle, dubbed Vision Fund, after deploying its first one of equal size.

The Committee on Foreign Investment in the United States (CFIUS), which reviews deals for potential national security concerns, approved the investment based on fresh assurances that Cruise's technology would be completely off limits to SoftBank, a source familiar with the matter said.

A SoftBank spokesman declined to comment. The Treasury Department, which leads CFIUS, did not respond immediately to a request for comment.

The approval unlocks a seat for SoftBank on Cruise's board, formalising its oversight, and cements key financing for Cruise, which has raised US$7.25 billion in capital since last year, the company said.

However, approval for the deal did not always appear certain as CFIUS scrutinised it closely, according to two people close to the deal.

The US$2.25 billion investment was unveiled by SoftBank in May 2018 amid a wave of investments by the Japanese technology and telecommunications conglomerate in artificial intelligence, data analytics, financial services and self-driving cars.

The investment raised red flags with CFIUS because SoftBank invests in numerous mobility units, some based in China, and encourages companies it invests in to share information.

CFIUS was especially concerned about SoftBank's co-investments with Tencent Holdings, a Chinese social media and gaming giant, and its investment in China ride-hailing firm Didi, which it fears could take technology from Cruise, sources said.

CFIUS halted a plan last year by Ant Financial, owned by the chairman of China's Internet conglomerate Alibaba, to acquire MoneyGram International.

The Cruise deal was structured to allow US$900 million of the investment to be disbursed initially, with the remainder provided once Cruise AVs are ready for commercial deployment and contingent on regulatory approval. The two tranches would combine to give SoftBank a nearly 20 per cent stake in Cruise.

However, the Japanese firm separately announced a joint investment with GM, T Rowe Price, and Honda of US$1.15 billion earlier this year, further boosting its stake.

Softbank's investment, followed by Honda's announcement in October that it will pour US$2.75 billion into Cruise, is still one of the biggest and most high-profile investments in self-driving technology to date.

Its Vision Fund, the world's largest technology fund, unveiled a US$1.5 billion investment in China's top used car platform, Chehauduo Group, in February.

This is not the first time SoftBank has gone through a protracted CFIUS review. It has had to accept US restrictions on how it runs some of its companies, including wireless carrier Sprint and investment firm Fortress Investment Group.

GM Cruise and Alphabet's Waymo are often described as leading the pack of technology and auto companies competing to create self-driving cars and integrate them into ride services fleets. REUTERS