Shareholders Expand Suit After Fintech Abandons $1.7B Deal

By Joanne Faulkner
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Law360, London (July 14, 2020, 1:31 PM BST) -- More shareholders have joined a lawsuit in England against WEX Inc. after the financial technology company said it could walk away from a $1.7 billion deal to buy two travel payment businesses because of the effects of the coronavirus pandemic.

The fintech company is being sued for pulling out of a deal after stating that the pandemic has had a "material adverse effect" on the transaction. (AP)

More than 100 shareholders in Optal Ltd., a virtual card issuer, are suing WEX after it terminated its acquisition. The company has stated that COVID-19 has had a "material adverse effect" on the transaction.

The payments technology company had been set to buy Optal and eNett International (Jersey) Ltd. from Travelport, which is owned by New York private equity firm Elliot Management. Judge Sara Cockerill ruled at the High Court on July 5 that seven more shareholders could be added to Optal's suit bringing the total to 113, a mix of individuals and institutional investors.

The claim, filed in May, alleges that WEX breached the terms of its share purchase agreement when it backed out of the deal and should be required to complete the purchase as announced in January.

WEX, which offers specialized payments services, has since argued that both businesses experienced material adverse effects from the pandemic that were disproportionate to the rest of the industry, allowing it to pull out of the agreements.

Material adverse effect clauses allow buyers to terminate a purchase agreement if an event has significantly affected the value of the company.

Optal denies that that COVID-19 has had a disproportionate effect on it or eNett in comparison with its competitors. They also argue that pandemics should "be excluded expressly from constituting, contributing to or being taken into account in determining" when determining the definition of a material adverse effect.

The lawsuit says that WEX has failed to fulfill contractual obligations included in the sale agreement since the U.S. company told Optal in May that it wanted to abandon the deal. The shareholders want WEX to finalize its financing, obtain the remaining approvals from government and close the transaction.

The shareholders are seeking a declaration from a judge that "no material adverse effect has occurred" and that the deal should go ahead.

Travelport also filed litigation against WEX at the High Court in May. 

Representatives for the two sides did not immediately respond to requests for comment.  

The claimants are represented by Laurence Rabinowitz QC, Sa'ad Hossain QC and Tim Goldfarb of One Essex Court, instructed by Herbert Smith Freehills LLP.

Counsel information for the defendants was not immediately available.

The case is Olding and others v. WEX Inc, case number CL-2020-000288 in the Commercial Court, Queen's Bench Division of the High Court of Justice of England and Wales.

--Additional reporting by Elise Hansen. Editing by Ed Harris.

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