Payment Providers Fight To Force WEX To Close $1.7B Deal

By Paige Long
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Law360, London (September 21, 2020, 6:25 PM BST) -- WEX shouldn't be able to use the coronavirus pandemic to escape a $1.7 billion deal for a pair of travel payment providers, the seller's lawyers said at trial Monday. 

The trial kicked off with fighting over whether Optal Ltd. and eNett International (Jersey) Ltd. were disproportionately affected by COVID-19, triggering a material adverse effects clause in the $1.7 billion deal that WEX Inc. entered into in January to pick up the companies from private equity-backed Travelport.

WEX, a financial technology company based in Maine, has sought to pull out of the agreement by arguing that both businesses were affected by the pandemic beyond the rest of the payments industry. Much of the lawsuit, which the sellers filed to force WEX to go through with the deal, turns on whether Optal and eNett should be measured against the travel payments sector or the broader payments industry.

Richard Hill, counsel for the sellers, said at the High Court that documents and communications leading up to the January deal show that WEX's "strategic rationale" for buying virtual card issuer Optal and E-Nett was to boost its foothold in the travel payments industry.

WEX's efforts to have the companies treated as operating in the general payments industry would widen the pool of peers on which to assess the effects of COVID-19 to an "impracticable" scale, he said.

"This acquisition was all about strengthening its position in the travel payments business space [and] enhancing its leadership in this sector," Hill said. "The parties clearly understood that WEX was buying a travel payments business."

Judge Sara Cockerill has to decide which industries eNett and Optal Groups operate in, to assess whether WEX can rely on an exception in the contract to avoid closing the deal with Travelport, which is owned by New York private equity firm Elliot Management.

The sellers filed their suit in May, alleging that WEX breached the terms of the agreement and should be required to complete the purchase. They say that the bulk of eNett's and Optal's revenues comes from their so-called travel payments business — in which they provide payment services such as virtual credit cards to online travel agencies — and that their rivals were all affected by the pandemic in the same way.

But WEX says that the small number of companies put forward as competitors in that space do not make up an "industry," and so the correct marker should be the wider payments industry.

Sonia Tolaney QC, counsel for WEX, urged Judge Cockerill to focus on the "natural and ordinary" meaning of the words used in the contract itself, which she said was drawn up by sophisticated businesses with the help of Magic Circle law firms.

She said Hill's reliance on "extraneous" material beyond the contract to show what the parties' intentions were was a "red herring," designed to distract the judge from the wording of the contract.

"Nothing in the SPA supports the claimant's case," Tolaney said, adding that the terminology being used in the High Court case of a "travel payments industry" was never included in the contract or corporate and regulatory filings.

The trial is expected to continue until next Tuesday.

The claimants are represented by Richard Hill QC, Andrew de Mestre QC and Lara Hassell-Hart of 4 Stone Buildings, and Sa'ad Hossain QC, Sebastian Isaac and Tim Goldfarb of One Essex Court, instructed by Macfarlanes LLP and Herbert Smith Freehills.

WEX is represented by Sonia Tolaney QC, James McDonald, Emma Jones and Andrew Lodder of One Essex Court, instructed by Freshfields Bruckhaus Deringer LLP.

The cases are Olding and others v. WEX Inc., and Travelport Ltd. and others v. WEX Inc., case numbers CL-2020-000288 and CL-2020-000287, in the Commercial Court, Queen's Bench Division of the High Court of Justice of England and Wales.

--Additional reporting by Joanne Faulkner and Elise Hansen. Editing by Alyssa Miller.

Update: This story has been updated with additional counsel information.

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