Ucommune, which had filed for IPO last year but did not get listed, will become a publicly-traded company upon completion of this merger
U.S.-based Orisun Acquisition Corp., a company specially formed for merger and acquisition purposes, will merge with Ucommune Group Holdings Limited, a leading co-working space manager and provider in China, Orisun announced in a press release on July 7.
Ucommune Group Holdings, a holding company, was incorporated in the Cayman Islands in 2018 to change Ucommune Ventures’ domicile country in preparation for its overseas IPO, according to the company’s SEC filing.
According to the press release, upon completion of the transaction, Ucommune will become a wholly owned subsidiary of Uncommune International, a Cayman Islands exempted company and wholly owned subsidiary of Orisun, which will be reincorporated in Cayman Islands for this merger.
Ucommune’s current management team will continue to run the company after the merger, and the combined company, which will have a pro forma firm value of approximately $769 million at closing, will trade on NASDAQ under a new ticker symbol after the completion of the transaction, Orisun said.
Ucommune was founded in 2015 as Urwork by Daqing Mao, a former executive of Vanke, a large residential real estate developer in China. The startup changed its name to Ucommune in late 2017 after WeWork filed a trademark-infringement lawsuit against it.
The co-working startup, which opened its first office in 2018, currently claims to be the largest agile office space manager and co-working community operator in China, with over 700,000 members and more than 94,000 work stations across 211 office spaces in Greater China and Singapore, with an aggregate managed area of 686,000 square meters (approximately 7.38 million square feet) as of December 31, 2019.
According to the press report, Ucommune has been developing an asset-light model under which the startup offers space design, renovation, and management services to develop and manage co-working spaces for landlords who bear the brunt of the capital investments associated with building and launching new spaces.
Ucommune also offers other revenue generating services to over 700 business partners, including advertising and branding, catering, fitness, healthcare, training and entertainment as well as general corporate services, such as corporate secretary, human resources, legal, finance, IT support and tax services, according to the press release.
The 5-year-old startup is backed by renowned investors including Sequoia Capital China, Matrix Partners China, Sinovation Ventures, ZhenFund, and Gopher Asset Management.
The startup had raised $200 million in its Series D funding round in 2018, at a valuation of $2.6 billion, and has raised over $700 million in 11 funding rounds to date.
Often referred to as China’s WeWork, Ucommune had filed for IPO last December, a few months after its American counterpart’s IPO plans went up in flames.
According to a report by Reuters, Citigroup and Credit Suisse could not agree with the startup on an achievable valuation, and left their roles as underwiters of the deal. Another report by Bloomberg said that Bank of America also abandoned its role in the deal.
Although the startup’s IPO dreams did not materialize, the company will trade publicly upon completion of the merger, since Ucommune will become a wholly-owned subsidiary of Ucommune International, which is a wholly-owned subsidiary of Orisun, a NASDAQ listed company.
Ucommune’s revenues grew over 160% in 2019 to $170 million, compared to a year before, according to the press release. While the startup’s revenues are on the rise, so are its losses—Ucommune’s net loss doubled approximately $80 million between Q1 and Q3 of 2019, compared to 2018.
Although the startup expects a moderate shrink in revenue this year owing to the impact of the global coronavirus pandemic, Ucommune has reportedly improved its revenue in the last few weeks, and forecasts a growth in revenue of 22% CAGR between 2017 and 2022.
At that growth rate, the startup is expected to generate revenues of approximately $190 million and $295 million in 2021 and 2022, respectively, according to the press report.
According to consulting and research firm Frost & Sullivan, the Agile Office Space Industry in China is valued at RMB 132 billion (approximately US$19 billion), and has grown at a CAGR of 72% between 2013 and 2018. The firm estimates the market to grow at a CAGR of 50% from 2018 to 1.03 trillion RMB (approximately $146 billion in USD) by 2023.
Chairwoman of Orisun Wei Chen said, “We are excited to combine Orisun with Ucommune and admire the Company that Mr. Daqing Mao and the Ucommune management team have built. I look forward to working with Ucommune’s dynamic management team to help them thrive as a public company while they continue to grow.”
CEO of Ucommune Daqing Mao said, “This transaction directly aligns with our strategic objectives, and will unleash the exciting potential of our new growth initiatives, including the expansion of our asset-light model. As a publicly listed company, we look forward to strengthening our market leading position and to expanding our footprint in China.”
“With smart technology and efficient business operations, we will continue to empower more members in communities across China, unleashing their potential and creating maximum value for society,” he added.
Header image courtesy of Ucommune