SoftBank group has made a $ 3 billion takeover bid for WeWork Shares – citing unfulfilled closing conditions.
The investment giant was said to have gotten cold feet when the WSJ reported last month that it was using government investigations as a means to resign from its obligation to acquire $ 3 billion in shares from existing WeWork shareholders to buy.
Under the share buyback agreement negotiated last year, WeWork founder Adam Neumann was to receive nearly $ 1 billion for his shares in the cooperating company. The former CEO had already been pushed out of office at that point after public markets overruled his leadership, as we reported at the time.
In a press release released today, SoftBank SVP and Chief Legal Officer Rob Townsend wrote:
SoftBank remains fully committed to WeWork's success and has taken important steps to strengthen the company since October, including tied-up capital, developing a new strategic plan for WeWork, and hiring a new world-class management team. The takeover bid was an offer to buy shares directly from other major shareholders. The termination does not affect WeWork's business or customers. A precondition for the completion of the takeover offer was the fulfillment of certain closing conditions that the parties had agreed to protect SoftBank in October last year. Some of these conditions were not met, so SoftBank had no choice but to cancel the takeover offer.
SoftBank lists the unfulfilled conditions that led to the termination of the offer:
- Failure to obtain the required antitrust approvals by April 1, 2020;
- Failure to sign and complete the rollout of the Chinese joint venture by April 1, 2020;
- Failure to complete roll-up of Asia (ex-China and ex-Japan) joint venture by April 1, 2020;
- The existence of several new and significant pending criminal and civil investigations that have begun since the MTA was signed in October 2019 and from which authorities have requested information, including WeWork funding activities, investor communications, and business relationships with Adam Neumann, operating and financial position; and
- The existence of several new measures by governments around the world related to COVID-19 that restrict WeWork and its operations.
A WeWork spokeswoman declined to comment on SoftBank withdrawing the offer. However, Reuters has reported that a WeWork board special committee said he was "disappointed" with the development and was considering "all legal options, including litigation".
At the time of writing, SoftBank had not yet responded to a comment request.
The press release emphasizes that “Neumann, his family and certain large institutional shareholders such as Benchmark Capital was the parties that benefited the most from the takeover bid. "
“Together, Mr. Neumann's equity and Benchmark make up more than half of the shares offered. In contrast, current WeWork employees have advertised less than 10 percent of the total, ”she writes, adding:“ SoftBank previously worked with WeWork to finalize an earlier phase of the takeover offer, in which more than 4,000 employees revalued out of the money were able to offer stock options at lower exercise prices that would provide these employees with more than $ 140 million in reduced exercise prices (if such options had been worth much less or nothing without such revaluation). "
Earlier this week, WeWork announced the sale of Meetup, a social networking platform designed to connect people personally, at an undisclosed price that is reported to be well below the WeWork purchase price paid in 2017 for it $ 156 million.
The novel corona virus has certainly disrupted business with hipster employees and social networks, as the population is encouraged to do the opposite of mixing. The short-term prospects for collaborative spaces in a new age of social distancing and encouraged (or forced) home work look bleak.
Outside of Asia, WeWork has so far closed only a tiny minority of its locations worldwide due to the corona virus pandemic.
Even in badly affected cities in Europe such as Madrid and Milan – where governments have implemented stringent quarantine measures to stem the flood of COVID 19 deaths – WeWork has not taken the step to close cooperation rooms.
Instead, buildings in Europe and the United States were temporarily closed or only individual floors when infections were found.
It's different in Asia. According to an updated list of building closures on the WeWork website, the company closed more than 30 locations in various cities in India on March 23 – but only after the government imposed a three-week nationwide ban, in which the 1.3 billion Indian residents have been instructed to stay at home.
Elsewhere, WeWork members may see little reason to quarantine to get to a shared workspace if, provided they have the Internet at home, they can stay where they are and be just as productive, without taking the risk of spreading or catching the virus – hence the zoom videoconferencing boom.
WeWork's response to the coronavirus crisis has also led to some rifts in membership. Members' press reports have been annoyed that they have refused to reimburse rooms that they (with a clear conscience) cannot use.
It was also criticized by members who were annoyed that priority was given to prioritizing rental income from small businesses with very low cash requirements, rather than closing during a public health crisis. (We've heard similar stories from members who didn't want to be publicly identified.)
WeWork, meanwhile, has justified staying open in a pandemic by claiming that its locations contain people who do essential work.
When we asked the company about its response to the coronavirus last month, it said to us, "We are closely monitoring the coronavirus pandemic (COVID-19) and have taken a number of precautions to cleanliness" and continued all internal and member events until further notice from March 12th.
On the same day, it had given its own employees the opportunity to work from home – although its doors remained open to members who hold key cards and pay fees.