(Reuters) - A WeWork board committee that negotiated a $3 billion tender offer with SoftBank Group sued the Japanese conglomerate on Tuesday for abandoning the deal, accusing it of succumbing to “buyer’s remorse” amid the novel coronavirus outbreak.

FILE PHOTO: A WeWork logo is seen at a WeWork office in San Francisco, California, U.S. September 30, 2019. REUTERS/Kate Munsch

The tender offer was part of a $9.6 billion rescue financing package that SoftBank agreed with WeWork in October that gave it control of the company. Since then, the office space-sharing start-up’s occupancy rates have plummeted, as customers in big cities stay at home to prevent the spread of the virus.

SoftBank said last week it would not press ahead with the tender offer because several pre-conditions had not been met, frustrating WeWork’s minority shareholders, who were expecting a payout. They included co-founder and former Chief Executive Adam Neumann, venture capital firm Benchmark Capital and employees with equity in the company.

While SoftBank cited the business impact of the COVID-19 pandemic as one of the reasons it would not complete the tender offer, it also pointed to U.S. criminal and civil investigations into WeWork and the failure to restructure a joint venture in China as grounds for abandoning it.

An independent two-member special committee of WeWork filed the lawsuit, calling SoftBank’s decision to terminate the tender offer wrongful. The committee comprises Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Capital, and Lew Frankfort, who is the former CEO of luxury handbag maker Coach.

“SoftBank’s failure to consummate the tender offer is a clear breach of its contractual obligations ... as well as a breach of SoftBank’s fiduciary obligations to WeWork’s minority stockholders, including hundreds of current and former employees,” the special committee said.

WeWork argued the investigations were not material to the company’s business, and that SoftBank had pursued an alternative deal for the China business with minority investor Trustbridge Partners, voiding its right to walk away from the deal.

Trustbridge did not immediately respond to a request for comment.

“Nothing in the special committee’s filing today credibly refutes SoftBank’s decision to terminate the tender offer. SoftBank will vigorously defend this suit. The special Committee will not prevail in this mistaken attempt to force SoftBank to purchase their shares when it is not legally obligated to do so,” SoftBank said in a statement.

WeWork is asking a Delaware judge for so-called “specific performance,” or performance of a contractual duty, so that SoftBank is forced to complete the tender offer, or for damages in an amount to be determined at trial.

Gabriel Rauterberg, a University of Michigan law professor, said that courts in Delaware, where WeWork is suing SoftBank, are generally receptive to arguments about specific performance.

CASH CRUNCH

Even without the tender offer, SoftBank and its $100 billion Vision Fund currently own 52.3% of WeWork. While most of the financing agreed in October has been provided to WeWork, some $1.1 billion of senior secured debt was contingent on the tender offer being completed.

WeWork was facing a cash crunch before its deal with SoftBank in October, and was forced to scrap plans for an initial public offering, as investors soured on its loss-making rapid expansion.

WeWork told bond investors last month that it had $4.4 billion in cash and cash commitments as of the end of December, and would be able to weather the economic downturn. SoftBank has installed Sandeep Mathrani, former chief executive of Brookfield Properties’ retail group, as WeWork’s new CEO.

Neumann, who attracted criticism for his management of the company before being ousted in September, had negotiated the right to sell $970 million of his shares as part of the tender program. Some $450 million of the tender offer was allotted to current and former employees.

SoftBank has so far invested more than $13.5 billion in WeWork. In two previous tender offers in 2017 and 2019, WeWork shareholders and employees had received a total of $2.3 billion from SoftBank.

But the conglomerate has been under growing financial strain, with souring tech bets bringing it under pressure from activist investor Elliott Management and pushing it into a radical pledge to raise $41 billion by selling down core assets to raise cash for share buybacks and to reduce debt.