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Carlyle, GIC sued over AmEx stock buy

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Carlyle Group and Singapore sovereign wealth fund GIC are allegedly using fake excuses to renege on buying a 20 per cent stake in American Express Global Business Travel (AmEx GBT), according an unsealed lawsuit.

[NEW YORK] Carlyle Group and Singapore sovereign wealth fund GIC are allegedly using fake excuses to renege on buying a 20 per cent stake in American Express Global Business Travel (AmEx GBT), according an unsealed lawsuit.

A unit of Certares Management (see amendment note) claims Carlyle’s losses from the coronavirus left it with a whopping case of buyer’s remorse and prompted its attempt to scrap the stock purchase, which had valued the travel entity at US$5 billion when it was announced in 2019. 

Certares leads a group of investors in the deal, including the Qatar Investment Authority and several Carlyle entities. “The Carlyle Group’s losses do not provide defendants with a basis to withdraw from the transaction,” Juweel Investors, a subsidiary of New York-based Certares, said in the lawsuit unsealed Monday in Delaware Chancery Court. The investment fund “cobbled together a series of pretextual and transparently false excuses to justify their refusal to close” the deal, Juweel said.

The dispute is among a half-dozen busted-deal cases tied to Covid-19 that have found their way to Delaware's business court. The state is the corporate home to more than half of US public companies and more than 60 per cent of Fortune 500 firms. Chancery court judges hear cases without juries and can't award punitive damages.

PRICE ROSE

In its complaint, Juweel said Carlyle and GIC baulked after the price of the deal rose when AmEx GBT sought to use a portion of the proceeds to cover operating losses tied to the pandemic. Juweel said the purchase agreement didn't bar it from using the proceeds to fund its operations. The Certares unit also said it was prepared to close the deal under the agreed terms, according to court filings.

"The sellers violated several terms of the purchase agreement and as a result we are seeking a judicial confirmation that we have no obligation to close the transaction," Brittany Berliner, a spokesperson for Carlyle, said in a statement.

Jason Leow, a spokesperson for the Singapore sovereign wealth fund, didn't immediately respond to an email requesting comment sent outside normal business hours. Other members of the investment group include funds managed by BlackRock, and Teacher Retirement System of Texas, according to a press release issued when the deal was announced.

The pandemic has roiled the travel industry, with companies suffering huge revenue drops, prompting worker layoffs. AmEx GBT offers travel services primarily to businesses that book airfare and hotel rooms.The travel business was growing before Covid-19, generating US$5.7 trillion in annual revenue and creating 319 million jobs. Companies spent more than US$305 billion on travel in 2018, a 4.5 per cent gain from the year earlier, according to Bloomberg Intelligence, citing data from the Global Business Travel Association.

Carlyle and GIC say the economic body blows the US economy suffered from the virus amount to a "material adverse effect" under the stock-purchase agreement that allows them to scuttle the deal, Juweel said in the complaint. The funds have countersued to get a judge to approve their decision to pull out. But the Certares unit said the stock-purchase agreement contains provisions that rule out a material adverse effect based on "any disruption" to the US "financial, banking or securities markets", according to the lawsuit. Juweel also said in the complaint that the agreement specifically bars Carlyle from arguing changes to “general business or economic conditions” provide a legitimate basis for calling off the deal.

Juweel officials have asked Chancery Judge Joseph Slights III to put the lawsuit on a fast track for trial because of worries about missing a June financing deadline. The judge is scheduled to hear Juweel's request at a May 14 hearing. The case is Juweel Investors Limited v Carlyle Roundtrip, LP, No 2020-0338, Delaware Chancery Court (Dover).

BLOOMBERG

Amendment Note: A previous version of the article stated a unit of the Qatar Investment Authority was suing Carlyle Group and GIC when it is actually a unit of Certares Management, Juweel Investors, that is suing. Certares Management leads a group of investors in the AmEx GBT deal, including the Qatar Investment Authority and several Carlyle entities. 

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