WeWork sues Softbank over decision to terminate tender offer

Claiming Softbank's decision to withdraw is a breach of contractual obligations and fiduciary duty.

WeWork has filed a lawsuit against Softbank, alleging that the Japanese tech giant's recent decision to end a $3 billion tender offer was in breach of an agreement made by the two companies in October last year.

The agreement was signed by SoftBank, the SoftBank Vision Fund, WeWork, and its co-founder Adam Neumann.

Softbank withdrew its tender offer for WeWork shares early last week, citing that WeWork failed to meet "certain conditions" of the agreement. According to Softbank, the unfulfilled conditions were a failure to secure necessary antitrust approvals by an April 1 deadline and a failure to close and wrap up joint ventures in Asia.  

SoftBank also cited "the existence of multiple, new, and significant pending criminal and civil investigations" that were launched after the original tender offer was signed, as well as the COVID-19 outbreak, which has caused severe disruption for businesses worldwide. 

"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," the company said

See also: WeWork and Uber drag SoftBank Group into historic negative territory

However, WeWork alleged in its lawsuit, which was filed in the Delaware Court of Chancery, that Softbank decision had breached its contractual obligations under the agreement and its "fiduciary duty to minority stockholders, including hundreds of its current and former employees".

"The Special Committee regrets the fact that Softbank continues to put its own interests ahead of those of WeWork's minority stockholders," WeWork stated.

"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."

WeWork cited, as an example, that "Softbank first tried to thwart the roll-up of WeWork's joint venture in China, and then 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," WeWork claimed.

WeWork is now calling for Softbank to complete the tender offer, or alternatively, provide compensation for breaching the contract and its fiduciary duty.

"We are committed to enforcing the terms of the MTA (master transaction agreement) and to ensuring that SoftBank upholds its commitments to WeWork's minority stockholders," WeWork said.

On Tuesday, SoftBank founder and CEO Masayoshi Son said at least 15 companies in the Vision Fund would go bankrupt as the company tightens its financial belt in the midst of the novel COVID-19 outbreak. 

SoftBank Vision Fund reported operating losses of ¥225 billion during Q3, which almost completely wiped out the Japanese company's bottom line.

In addition, SoftBank recently announced a $41 billion share buyback scheme that would involve the sale of assets to shore up share prices and reduce debt. A $4.8 billion buyback scheme, separate from the latest program, is also in motion. 

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