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. As detailed in the complaint, SoftBank’s wrongful action constitutes both a breach of contract and a breach of fiduciary duty to WeWork’s minority stockholders, including hundreds of its current and former employees. The MTA was previously announced on October 22, 2019, and amended on December 27, 2019.
The Special Committee issued the following statement:
SoftBank’s failure to consummate the tender offer is a clear breach of its contractual obligations under the MTA 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 regrets the fact that SoftBank continues to put its own interests ahead of those of WeWork’s minority stockholders.
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. For example, 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.
The Special Committee is seeking specific performance requiring SoftBank to complete the tender offer or, in the alternative, compensatory damages for SoftBank’s breaches of contract and fiduciary duty. We are committed to enforcing the terms of the MTA and to ensuring that SoftBank upholds its commitments to WeWork’s minority stockholders.
The following are among the key reasons, further outlined in the lawsuit, that SoftBank has breached the MTA and its fiduciary duties to WeWork’s minority stockholders:
SoftBank is under increasing pressure from activist investors and its preference not to spend the required $3 billion to consummate the tender offer does not excuse SoftBank’s obligations to do so.
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.
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.
The government investigations, in part stemming from SoftBank’s own statements, and stockholder lawsuits in California state court are not expected to create any material risk for WeWork. Importantly, SoftBank knew of all of the investigations at the time that it signed the December 27, 2019 amendment to the MTA.
Neither the MTA nor the conditions to the tender offer contain any material adverse effect provision that could allow SoftBank to avoid closing the tender offer as a result of current global events.
Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal advisor and Perella Weinberg Partners LP is serving as financial advisor to the Special Committee of the WeWork Board of Directors.