SoftBank has pulled out of a planned $ 3 billion purchase of WeWork shares, a move that should spark litigation by the co-founder of the loss-making real estate group and one of Silicon’s most prestigious venture capital groups Valley, according to people informed about it.
The $ 3 billion takeover bid was agreed to last year as part of a multi-billion dollar bailout that SoftBank put in place as WeWork headed for insolvency. The takeover bid was intended to provide a lucrative payment to the company’s first backers, including Benchmark Capital, as well as Adam Neumann, former CEO of WeWork.
Benchmark, Neumann and other investors were to sue for the deal’s collapse, officials said.
Lawyers for Neumann, who was able to sell nearly $ 1 billion worth of shares in the transaction, were informed of the decision on Wednesday, one of the people said. SoftBank should inform other investors who had planned to sell their shares that it has withdrawn from the deal after the tender offer ended around midnight.
The withdrawal of SoftBank marks the latest reversal for the real estate company, which at one time was the most valued private group in the United States. WeWork has burned billions of dollars in cash as it expands around the world under Mr. Neumann’s leadership, opening sites in more than 100 cities. His attempt to go public last year failed as investors balked at his huge losses and a series of deals that personally benefited Mr. Neumann.
The decision to opt out of the $ 3 billion share purchase will also bring a necessary source of cash to WeWork. SoftBank had agreed to provide $ 1.1 billion in debt to the company in connection with the transaction, but only if it completed the takeover bid.
Last month, SoftBank told WeWork shareholders that it could withdraw from the tender, citing regulatory inquiries into the company, pending litigation and WeWork’s failure to finalize a joint venture in China, which she said was the terms of the $ 3 billion deal.
The Japanese tech telecom company has been debating the decision to withdraw from the tender for weeks, calling on outside legal counsel to make sure it reads the WeWork deal. a legal battle, added one person.
A special committee of the WeWork board of directors led by Bruce Dunlevie of Benchmark and Lew Frankfort, the former president of handbag maker Coach, responded last month with a public attack on SoftBank, calling the threat a maneuver. “Inappropriate and dishonest”. The special committee, which is advised by law firm Wilson Sonsini, said Wednesday night that it “would assess all of its legal options, including litigation.”
Benchmark was slated to sell about $ 350 million in shares after bringing its full stake of nearly $ 600 million, according to people familiar with the matter and documents reviewed by the Financial Times.
The first WeWork employees, who were to withdraw hundreds of millions of dollars from the takeover bid, also expressed anger at SoftBank’s threat to withdraw from the deal.
Marcelo Claure, director of operations for SoftBank, had talks with Sandeep Mathrani, managing director of WeWork, on the compensation of the employees of the company who had bid, although no agreement has been reached, said a source. .
WeWork, SoftBank and Benchmark declined to comment on the news, which had previously been reported by Bloomberg. Mr. Neumann could not be reached immediately for comment.