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Carlyle, Singapore’s GIC Sued Over Collapsed AmEx Stock Buy

Jef Feeley

(Bloomberg) -- Carlyle Group Inc. and Singapore sovereign-wealth fund GIC Pte. are using fake excuses to renege on buying a 20% stake in American Express Global Business Travel, according to a lawsuit unsealed in the U.S.A unit of Certares Management LLC 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 $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 Ltd., 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 found their way to Delaware’s business court. The state is the corporate home to more than half of U.S. public companies and more than 60% 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 balked 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 spokeswoman for Carlyle, said in an emailed statement.

Jason Leow, a spokesman for GIC -- the Singapore sovereign wealth fund -- didn’t respond to an email requesting comment. 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 $5.7 trillion in annual revenue and creating 319 million jobs. Companies spent more than $305 billion on travel in 2018, a 4.5% 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 U.S. 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 U.S. “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. “No MAE has occurred, or could reasonably be expected to occur, as a result of the effects of Covid-19,” Juweel officials claimed in the lawsuit.

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).

(Updates with Juweel claim. Earlier versions of this story corrected spelling of Certares and noted the Certares unit sued.)

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