SoftBank's Arora steps down as Son chooses to stay in charge

In a surprise move, Nikesh Arora, touted as heir apparent at SoftBank Group, will step down from the Japanese company.
In a surprise move, Nikesh Arora, touted as heir apparent at SoftBank Group, will step down from the Japanese company.PHOTO: REUTERS

TOKYO (BLOOMBERG) - Nikesh Arora, touted as heir apparent at SoftBank Group Corp., will step down from the Japanese company in a surprise departure after founder Masayoshi Son made clear he wouldn't get the top executive role in the near future.

The former Google executive and one of the highest-paid company officials in the world will remain as an adviser. Chairman Mr Son plans to keep leading the company while Arora wanted to take charge in a few years time, with the different timelines leading to Tuesday's resignation, the company said.

Mr Son, who had dubbed Arora his likely successor, wanted to maintain control of a company he built from a computer software distributor into one of Japan's largest telecommunications and investment holding corporations. He said Arora's departure had nothing to do with shareholder criticism of his track record and qualifications, which SoftBank this week said was unfounded.

"You can't really sprinkle any sugar on this one. This shows disunity," said Amir Anvarzadeh, manager of Japanese equity sales at BGC Partners Inc. "Given how much Son was putting the responsibility of running the business into his hands, to have him not there, I don't think anyone would say the share price will start going up."

Mr Son credited President Arora with playing a pivotal role in Tuesday's deal to sell a majority stake in Supercell Oy that valued the Clash of Clans developer at US$10.2 billion (S$13.7 billion).

Arora's exit may deal a blow to SoftBank's global aspirations. He was hired in 2014 after a decade at Google and promoted to president in June of last year. He's since built his own operation within SoftBank, an investment arm that will take stakes in technology companies around the world.

"I'll be forever young, that's what I want to keep thinking. I want to keep going until I lose confidence in my physical strength. And I'll want to keep holding on to the rudder more and more as the day of retirement approaches," Mr Son said as a smiling Arora looked on. "I feel really terrible for having inconvenienced Nikesh, but it would not be good to go out while holding my feelings back."

Though SoftBank put money into startups for decades, including a tumultuous foray during the dot-com bust, the effort had dwindled in recent years to what Son called a "hobby" next to his wireless and broadband businesses. Mr Arora revived the venture push and infused it with more ambition.

Mr Arora led a search for the next Alibaba Group Holding Ltd., the Chinese e-commerce leader that pulled off the world's largest initial public offering in 2014. SoftBank is the biggest shareholder in Alibaba.

MR Arora spearheaded investments in Indian e-commerce provider, ride-hailing service Ola Cabs, real-estate website and hotel-booking app Oyo Rooms. In October, SoftBank led a US$1 billion fundraising round for U.S.-based online lender Social Finance Inc.

But SoftBank's shares have languished, beaten back in part by its ill-advised investment in loss-making Sprint Corp. An investor group had called on the board this year to investigate and possibly dismiss Mr Arora in a sharply critical, 11-page letter. They asked whether Mr Arora harboured conflicts of interest at SoftBank because of his role as a senior adviser to private equity firm Silver Lake.

A separate letter to the board of Sprint, which SoftBank controls, asked for his removal as a director there for similar reasons. A special committee convened to look into the accusations found their claims without merit, SoftBank announced Monday.

"If you pass the baton before settling your feelings, it will be a mess later on. So I thought it is best to speak very honestly" with Nikesh, Son told reporters in Tokyo, adding that the pair had huddled together frequently in past weeks.

Arora bet some of his own money on his former employers. He borrowed heavily to buy 60 billion yen ($483 million at the time of the announcement) of SoftBank shares, more than any insider purchase by an executive in Japan in at least 12 years, according to data compiled by Bloomberg. Any shares he's purchased will be sold to Son at a small loss, Arora said.

It's unclear where Mr Arora is heading. The executive is leaving just as SoftBank agreed to sell Supercell, one of Son's most profitable deals as well as one of the quickest to bear fruit. SoftBank this month said it would raise $10 billion trimming its stake in Alibaba, an investment that started with $20 million in 2000.