A Special Committee of the board of WeWork’s parent company, The We Company, has sued SoftBank Group challenging SoftBank’s decision to not move forward with its $3 billion tender offer for WeWork shares after Softbank claimed that closing conditions were not met. The We Company is accusing SoftBank for alleged breach of contract and breach of fiduciary duty.
WeWork alleges that SoftBank has not fulfilled its obligations under the Master Transaction Agreement (MTA) because it has not completed the tender offer as described in the MTA. WeWork has sought to require “SoftBank to complete the tender offer or, in the alternative, compensatory damages for SoftBank’s breaches of contract and fiduciary duty.”
WeWork claims that SoftBank “is under increasing pressure from activist investors and its preference not to spemd the required $3 billion to consummate the tender offer does not excuse SoftBank’s obligations to do so.” They added that “SoftBank has already received most of the benefits provided to it under the MTA, including broad control of WeWork and additional economic benefits. SoftBank’s wrongful conduct in failing to consummate the tender offer deprives WeWork’s minority stockholders of the liquidity that they were promised.”
Additionally, WeWork notes that “SoftBank committed to use its reasonable best efforts to pursue the roll-up of WeWork’s joint venture in China. Instead, SoftBank purposefully pursued an alternative transaction with a key minority investor in the joint venture. SoftBank now claims that the failure of the condition related to the roll-up of WeWork’s Chinese joint venture – which failure was caused by SoftBank’s conduct – provides a basis for SoftBank to avoid closing the tender offer.”
SoftBank stated that as held within the MTA, “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.” Specifically, WeWork failed to “obtain the necessary antitrust approvals,” “sign and close the roll up of the China joint venture,” and “close the roll up of the Asia (ex-China and ex-Japan) joint venture” by the April 1 deadline. Additionally, Softbank stated that the “existence of multiple, new, and significant pending criminal and civil investigations that have begun since the MTA was signed in October 2019, in which authorities have requested information regarding, among other things, WeWork’s financing activities, communications with investors, business dealings with Adam Neumann, operations, and financial condition” as well as the “existence of multiple new actions by governments around the world related to COVID-19, imposing restrictions against WeWork and its operations” have caused SoftBank to determine that the agreed upon conditions were not met and satisfied. SoftBank added that this decision will not impact the other aspects of WeWork, including its operations. Softbank stated that it has provided in excess of $14.25 billion to date to WeWork, with $5.45 billion committed since October 2019.
“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,” Rob Townsend, Senior Vice President and Chief Legal Officer of SoftBank stated. “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…Given our fiduciary duty to our shareholders, it would be irresponsible of SoftBank to ignore the fact that the conditions were not satisfied and to nevertheless consummate the tender offer.”
This suit comes after SoftBank’s decision in October 2019 to take over WeWork, which led to a shareholder class action complaint against former CEO Adam Neumann. WeWork has faced trouble in the past few months after their initial public offering failed and Neumann was sued for employment discrimination.
