SoftBank has confirmed it won’t go ahead with a $3 billion deal to buy WeWork shares, citing “multiple, new, and significant” civil and criminal investigations into the office-leasing firm, among other factors.
SoftBank said on Thursday it would be “irresponsible” to continue with the deal under the circumstances.
The decision nixes an offer to buy $3 billion worth of shares from other investors and employees, including nearly some $970 million worth from former CEO Adam Neumann, a source with knowledge of the matter earlier told Business Insider.
SoftBank acknowledged on Thursday that Neumann and WeWork’s other big institutional investors such as Benchmark stood to benefit most from the offer.
Rob Townsend, senior vice president and chief legal officer of SoftBank said the firm remained committed to WeWork, which it bailed out in October 2019. The share package and an additional credit facility were part of the wider rescue package.
Townsend added that WeWork had not met certain conditions, “leaving SoftBank no choice but to terminate the tender offer.”
Specifically, SoftBank said WeWork had failed to meet certain deadlines by April 1, such as obtaining the right antitrust approvals and had rolling up its China and Asia joint ventures.
It also cited new criminal and civil investigations into WeWork, which deal with the firm’s financing activities, how it communicated with investors, and its business dealings with ex-CEO and cofounder Adam Neumann.
Reuters reported in November 2019 that the New York State Attorney General was investigating WeWork, specifically into whether Neumann had indulged in self-dealing.
“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,” said Townsend.
Business Insider reported on Wednesday that SoftBank was due to pull out of the deal, a decision that triggered censure from the special committee of WeWork’s board, which represents non-SoftBank backers such as Benchmark. The committee hinted at legal action against SoftBank.
“The Special Committee is surprised and disappointed at this development,” Benchmark investor Bruce Dunlevie and Coach CEO Lew Frankfort told BI. “The Special Committee,” they continued, “will evaluate all of its legal options, including litigation.”