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WeWork sues SoftBank for breach of contract over the termination of its $3 billion tender offer

Hemani Sheth Mumbai | Updated on April 08, 2020

Two WeWork directors on Tuesday filed a lawsuit against key investor SoftBank Group Corp on behalf of the co-working firm after the Japanese conglomerate terminated an earlier deal to buy $3 billion in WeWork’s shares.

WeWork has sued SoftBank for a breach of contract after Softbank had terminated the tender offer to purchase $3 billion worth of shares from the real estate firm earlier this month.

“The Special Committee of the Board of Directors of The We Company (“WeWork”) today announced that it has filed a lawsuit in the Delaware Court of Chancery alleging that SoftBank Group Corp. (TOKYO: 9984) (collectively with certain of its affiliates “SoftBank”) has breached its obligations under the Master Transaction Agreement (“MTA”) by failing to complete the tender offer contemplated by the MTA,” We Work had said in an official statement.

The trade agreement between WeWork and Softbank was announced on October 22, 2019, and amended on December 27, 2019. According to the agreement, SoftBank was to buy over $3 billion in shares from WeWork’s existing shareholders. As part of the agreement, the tender offer would materialize in April once WeWork has met certain performance milestones.

SoftBank, on April 2, had announced that it had terminated the tender offer as certain terms of the contract between the two firms had not been met by WeWork.

“in accordance with the terms of its October 2019 Master Transaction Agreement (“MTA”) with The We Company (“WeWork”), SoftBank’s tender offer for up to $3 billion worth of shares of WeWork held by other stockholders has ended because certain conditions to the tender offer were not satisfied,” SoftBank had said in an official statement.

“SoftBank remains fully committed to the success of WeWork and has taken significant steps to strengthen the company since October, including newly committed capital, the development of a new strategic plan for WeWork and the hiring of a new, world-class management team,” said Rob Townsend, Senior Vice President and Chief Legal Officer of SoftBank. “The tender offer was an offer to buy shares directly from other major stockholders and its termination has no impact on WeWork’s operations or customers. The tender offer closing was conditioned on the satisfaction of certain closing conditions the parties agreed to in October of last year for SoftBank’s protection. Several of those conditions were not met, leaving SoftBank no choice but to terminate the tender offer.”

However, WeWork directors have now sued the Japanese conglomerate stating that the tender offer had been terminated due to pressure from investors, leading to a breach of contract.

“Instead of abiding by its contractual obligations, SoftBank, under increasing pressure from activist investors, has engaged in a purposeful campaign to avoid completion of the tender offer,” it said.

The company also cited examples of Softbank’s attempt to “thwart the roll-up of WeWork’s joint venture in China” post which it had claimed that the conditions to closing the tender offer – one of which is the roll-up of WeWork’s joint venture in China – were not met.

“This, and SoftBank’s other claims related to its failure to complete the tender offer, are therefore either disingenuous or irrelevant to Softbank’s contractual and other obligations,” it further said.

The lawsuit has been filed in the Delaware Chancery Court.

Published on April 08, 2020

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