The COVID-19 pandemic has decimated the world's travel industry and fatally crippled a deal calling for the Carlyle Group and Singapore sovereign wealth fund GIC to buy 20% of American Express Global Business Travel, according to unsealed lawsuits.
Carlyle and GIC asked a judge in separate lawsuits to let them scrap the deal. In the lawsuits, the funds disputed claims by an investment group led by Certares Management — slated to sell the shares in the deal — that the pandemic doesn't provide legitimate legal grounds for pulling the plug. The $1.5 billion stock-purchase valued the travel entity's total worth at $5 billion.
Certares, respresenting other investors in the deal, sued earlier seeking an order from a judge to force Carlyle and GIC to finalize the deal. On Thursday, it failed to persuade Delaware Chancery Court Judge Joseph Slights III to schedule a quick trial on its lawsuit. Mr. Slights said it would be "impractical and imprudent" to try to protect the deal's June 30 financing deadline with a speedy hearing.
"It's not feasible in times we are in now, where most of the country is locked down because of a pandemic, international travel discouraged and health of population still at risk," the judge said. Certares' lawyer Tibor Nagy argued that without a trial by the end of June, financing for the deal would collapse.
"If this deal doesn't close by June 30, it will never close," Mr. Nagy told the judge on a conference call. Jonathan Polkes, one of Carlyle's lawyers, reminded the judge a decision on whether COVID-19 provides proper legal grounds to renege on deals will be groundbreaking. "This is going to be a very closely watched, bellwether case," he said.
"We respect the judge's decision today that the unique circumstances of the pandemic will not permit for an expedited trial, but we are confident in our case and will continue to pursue it vigorously," Charles Zehren, a Certares spokesman, said in an emailed statement.
The sale's specific terms don't bar canceling it if the world is rocked by a worldwide health crisis — like a pandemic — that paralyzes the airline, hotel and rental-car industries, Carlyle's and GIC's lawyers said in the lawsuits.
While the sale agreement allocates "certain risks to the purchasers, glaringly absent is a carve-out for pandemics," Carlyle's lawyers said.
The dispute is among more than a half-dozen busted-deal cases tied to COVID-19 that landed in 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 judges hear cases without juries and can't award punitive damages.