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SoftBank lays ground to abandon $3 billion WeWork tender offer

SoftBank Group Corp is considering pulling out of a $3 billion bid to buy additional shares in WeWork, because it feels the office-space sharing firm has not met the conditions for the deal, people familiar with the matter said on Tuesday. SoftBank's U-turn would be the latest blow for WeWork's investors, which last year saw the company's valuation plummet by tens of billions of dollars amid a failed attempt to go public and a cash crunch that threatened it with bankruptcy. SoftBank declined to comment and WeWork did not immediately respond to a request for comment about the potential withdrawal of the tender offer, which was reported earlier by the Wall Street Journal.

SoftBank in October agreed to buy up to $3 billion WeWork shares from existing investors through a tender offer, as part of a broader bailout worth almost $10 billion. The financing of WeWork has already been completed, and SoftBank has installed Sandeep Mathrani, former chief executive of Brookfield Properties' retail group, as its new CEO. In a notice to WeWork shareholders, SoftBank cited ongoing investigations into WeWork's business by the U.S. Securities and Exchange Commission and the U.S. Department of Justice, as well as a delay in recapitalizing WeWork's joint venture in China, as obstacles to the tender offer being completed, the sources said. Under the terms of the deal, SoftBank is to exchange its stake in the joint venture with shares in WeWork. Some investors in the joint venture have yet to consent to the deal, though the WeWork board directors who negotiated it believe SoftBank can do more to complete it, according to one of the sources. WeWork co-founder Adam Neumann, who attracted criticism for his management of the company as CEO before being ousted in September, had negotiated the right to sell $970 million of his shares as part of the tender program. The tender offer for the shares expires April 1, and SoftBank could let it lapse or extend it, the sources said. It was not immediately clear whether concerns over the impact of the coronavirus outbreak on WeWork's business have made SoftBank reluctant to proceed with the tender offer. SoftBank became WeWork's majority owner and Neumann gave up voting control over as a result of their deal in October, and it was also not clear if this would remain the case should the tender offer collapse.

March 18, 2020

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