Major China Coworking Firm Inks Merger Deal

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Ucommune Group Holdings Ltd., one of China’s leading coworking space providers and managers, has entered into a definitive merger agreement with Orisun Acquisition Corp., a New York-based special acquisition company. Upon closing of the transaction, the combined public entity will have a pro forma firm value totaling approximately $769 million and the resources will continue to expand.

Ucommune has been on a fast growth trajectory since its inception in 2015. “Ucommune … may lack WeWork’s muscle, but it’s clear that the company has considerable ambitions and plans to apply further pressure on WeWork in competitive markets,” CB Insights noted in a 2019 report on WeWork. Ucommune has an existing investor base that consists of Sequoia Capital China, Matrix Partners China, Sinovation Ventures, ZhenFund and Gopher Asset Management.

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As of the close of 2019, Ucommune boasted 700,000 members and a workspace management portfolio spanning 211 locations totaling nearly 7.4 million square feet in Greater China and Singapore.

The company centers on an asset-light model, which entails providing services ranging from space design to management for landlords who invest the bulk of required capital for buildout and launch. Additionally, the company aligns itself with more than 700 business partners to provide members with such revenue-generating services as branding, catering, training and entertainment, in addition to general corporate services covering everything from human resources to IT support to tax services.

Sealing the Deal

The merger agreement comes roughly one year after news emerged that Ucommune was preparing for a U.S. initial public offering and 11 months after Orisun announced the pricing of its IPO and began trading on the NASDAQ.

Per terms of the deal, Orisun will reincorporate to the Cayman Islands by merging with and into Ucommune International Ltd., which will then acquire Ucommune. Ultimately, the combined company will operate as Ucommune International. The stock transaction calls for Ucommune shareholders to receive 70 million ordinary shares of Ucommune International as well as entitlement to earn-out consideration of up to an additional 4 million ordinary shares.

Post-merger, Ucommune International will continue to follow an asset-light strategy while focusing on bolstering its market-leading position and expanding its presence in China.

Though occupancy in leading coworking or agile office space centers in Greater China plummeted to as low as 30 to 40 percent in the first eight weeks of the outbreak, as of late May, occupancy in several leading coworking centers in Mainland China and Hong Kong have recovered considerably, as per a June 2020 Asia Pacific report by CBRE. “The flexible space market remains resilient. The long-term drivers of flexible space demand are intact, with smaller users continuing to seek cost-effective fully furnished space and large multinationals looking to build more agility into their office portfolio,” the CBRE report states.