Daily Management Review

SoftBank Sued By WeWork For Cancelling The $3 Billion Tender Offer


SoftBank Sued By WeWork For Cancelling The $3 Billion Tender Offer
A case has been filed against the Japanese investment conglomerate SoftBank by a WeWork board committee that had secured a $3 billion tender offer with the Japanese conglomerate over accusations that it had abandoned the deal and accused the company of succumbing to “buyer’s remorse” even as the novel coronavirus pandemic rips through the business of WeWork.
In October, SoftBank had agreed to a rescue financing package worth $9.6 billion for WeWork which included the tender offer, following which the control over the office space renting company was accorded to the Japanese firm. However since then the occupancy rates of the office space-sharing start-up has plunged because clients of the company in big cities chose not to open offices and work from home due to the coronavirus pandemic.
Last week an announcement of abandoning the tender offer was made by SoftBank, alleging that WeWork had been unable to meet several pre-condition. The decision had irked the minority shareholders of WeWork who had been expecting a payout. Those expecting a payout from the tender offer was the WeWork co-founder and former Chief Executive Adam Neumann, venture capital firm Benchmark Capital and those employees of the company who hold shares of the company.  
SoftBank pointed out that that one of the major reasons for its decision to abandon the tender offer was also influenced by criminal and civil investigations in the United States into WeWork and the company not being able to restructure a joint venture in China, while also highlighting the business impact because of the impact of the coronavirus pandemic.
The lawsuit was filed by an independent two-member special committee of WeWork that termed the decision by SoftBank of cancelling the tender offer as being wrongful. That committee comprises Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Capital, and Lew Frankfort, who is the former CEO of luxury handbag maker Coach.
“SoftBank’s failure to consummate the tender offer is a clear breach of its contractual obligations ... as well as a breach of SoftBank’s fiduciary obligations to WeWork’s minority stockholders, including hundreds of current and former employees,” the special committee said.
Arguing against the charges leveled by SoftBank, WeWork said that there was no material implication on the business of the company because of the investigation and also argued that an alternative deal for the China business with minority investor Trustbridge Partners had been pursued by it. The startup argued that this rendered the right of Softbank to walk out of the deal as being void.
There were no comments from Trustbridge.
“Nothing in the special committee’s filing today credibly refutes SoftBank’s decision to terminate the tender offer. SoftBank will vigorously defend this suit. The special Committee will not prevail in this mistaken attempt to force SoftBank to purchase their shares when it is not legally obligated to do so,” SoftBank said in a statement.