Falling billion-dollar deals over coronavirus spur court fights

New York, May 1: A deal is a deal, except for a growing number of companies that agreed to buy assets before the Covid-19 pandemic sent markets plunging. 

Panicked executives already have launched a handful of legal battles that could blow up billions of dollars’ worth merger and acquisition agreements. And litigators predict at least a dozen more limping deals will crash land in courts over the next few months, Bloomberg reported. 

Among the high-profile transactions that have become feuds are Mirae Asset Global Investments Co’s $5.8-billion purchase of a US luxury hotel portfolio from Anbang Insurance Group, SoftBank Group’s $3-billion acquisition of We Cos. stock, and Sycamore Partners’ $1.1-billion deal for a controlling stake in L Brands, owner of the Victoria’s Secret lingerie chain. 

“The cases are just the tip of the iceberg,” Larry Hamermesh, a University of Pennsylvania law professor who specialises in Delaware corporate law, told Bloomberg. “There’s going to be a lot more deals that just get quietly renegotiated and never wind up in court.”  

Already, half a dozen cases of virus-related challenges to transactions are before judges in Delaware Chancery Court, records show. The state is the corporate home to more than half of US public companies and more than 60% of Fortune 500 firms.  

The main reason some big deals are ending up in court is that the value of assets companies agreed to buy have plummeted since the onset of the coronavirus pandemic. 

With shutdowns of most retail businesses including stores, movie theatres and restaurants, the US economy will contract a record 37% in the second quarter and have its worst recession since World War II, Bloomberg Industries estimates. More than 26 million Americans filed unemployment claims after losing their jobs.

https://www.bloomberg.com/news/articles/2020-04-29/exiting-billion-dollar-deals-over-virus-spurs-big-court-fights