On 7 December 2020, the Amsterdam District Court ruled in summary proceedings that travel agency Sunscreen, owner of Sunweb, a large national travel agency, is not obliged to proceed with the acquisition of all shares in Corendon, a competing Dutch based travel agency. The proceedings were initiated by Corendon when Sunscreen refused to complete the transaction on the basis of the share purchase agreement signed by the parties. The court based its ruling on the notion that the adverse consequences of a forced acquisition for both businesses cannot be foreseen.
Background
Parties entered into a share purchase agreement on 6 December 2019 pursuant to which Sunscreen, a company controlled by private equity firm Triton, has purchased all shares in the capital of Corendon (the SPA). One of the objectives of the acquisition was to create an industry player that could better compete with the likes of Booking.com and Expedia, as well as with travel giant TUI.
The SPA provided that completion of the transaction is subject to the fulfilment of four conditions precedent prior to 31 October 2020 (the Long Stop Date). One of the conditions was competition clearance, which was obtained before the Long Stop Date as were two other conditions.
The last condition required the confirmation of the Human Environment and Transport Inspectorate (Inspectie Leefomgeving en Transport, ILT) that, due to the proposed transaction, ILT does not require (i) a submission of a revised business plan by Corendon Dutch Airlines B.V., a subsidiary of the target operating a small airline, or (ii) a reapplication for an operating license (the AOC Conditions).
Corendon has argued, on the basis of a letter received from ILT on 9 October 2020, that the AOC Conditions have been fulfilled. Sunscreen disagreed with that view and terminated the SPA since the AOC Conditions could not be fulfilled prior to the Long Stop Date anymore.
Summary proceedings
Corendon initiated summary proceedings claiming that all conditions precedent have been met and that Sunscreen should proceed with completion. According to Corendon, Sunscreen used the AOC Conditions as a pretense to back out of the transaction. The travel industry has been hit extremely hard by the COVID-19 pandemic and it will take a long time to recover. Sunscreen was simply unwilling to pay the consideration determined before the COVID-19 outbreak and used the AOC Conditions as a lever to renegotiate terms.
Sunscreen countered by saying that the AOC Conditions have not been met and could not have been met prior to the Long Stop Date anymore and as such, it has rightfully terminated the SPA. Sunscreen also argued that if Corendon's claim is awarded, it will have to file for bankruptcy as it has insufficient means to pay the purchase price.
Ruling
Courts in summary proceedings have no means or time to properly review or research the matter presented to them and are therefore required to issue a decision anticipating the possible outcome in proceedings on merits that may be initiated in the matter. Their rulings are therefore always of a preliminary nature. The court ruling on the matter argued that in proceedings on merits, the court overseeing these proceedings is likely to conclude that the AOC Conditions have been met prior to the Long Stop Date and therefore shall rule in favor of Corendon. Nevertheless, it has rejected Corendon's claim stating that as both businesses have been and are being heavily affected by the impact of COVID-19 on the travel industry, awarding the claim and forcing Sunscreen to complete the transaction will trigger adverse consequences that will be extremely far-reaching for both businesses and possibly irreversible. This leads to the conclusion, according to the court, that Corendon's 'all or nothing claim' is not suitable to be granted in summary proceedings. The court advised the parties to try and find a compromise and strike a deal.
This ruling is one of a few that has been sought in connection with requiring a purchaser to complete an M&A transaction whereby the share purchase agreement has been signed before or at a very early stage of the COVID-19 outbreak. Although specific cases are difficult to compare, the Amsterdam District Court forced Nordian Capital in summary proceedings to sign a share purchase agreement with J-Club, even though the transaction was heavily affected by COVID-19. This transaction eventually completed in October 2020. We refer to our newsflash of 19 May 2020.
Corendon has indicated that it will appeal the ruling.
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