Twitter accepts Elon Musk’s buyout deal

Twitter’s board has accepted an offer from billionaire Elon Musk to buy the social media company and take it privately, the company announced Monday.

The stock closed up 5.64% for the day after it was stopped for the news.

“Freedom of speech is the foundation of a functioning democracy, and Twitter is the digital city square where issues crucial to humanity’s future are discussed,” Musk said in a statement included in the $ 44 billion press release announcing the deal. “I also want to make Twitter better than ever by improving the product with new features, making the algorithms open source to increase trust, defeat spambots and authenticate all people. Twitter has enormous potential – I look forward to working with the company and community of users to unlock it. “

The cash trade at $ 54.20 per share is estimated at around $ 44 billion, according to the press release. Twitter would become a private company once the deal is completed, requiring approval from shareholders and authorities.

The announcement concludes a week-long saga that Musk started when he revealed a large stake in the company. Shortly afterwards, the company said he would join the board, only for Musk to turn the course on that plan several days later. He then offered to buy the company at $ 54.20 per share, his “best and last.” That offer valued Twitter at about $ 43 billion.

Assuming the deal closes and Musk takes ownership of Twitter, the company will be controlled by the world’s richest person and a person who has been a major critic of the platform while using it in legally disputed ways, mostly through sensitive posts about his carmaker, Tesla.

Although Musk has indicated that his primary interest in Twitter has to do with what he considers the company’s censorship of free speech, Musk critics are concerned that the billionaire’s control of the platform will result in their votes and others he may . disagree as he has often blocked critics from his personal account.

Twitter’s board tried to ward off a hostile takeover by adopting a so-called poison pill or shareholder rights agreement that would allow other shareholders to buy the stock at a discount if Musk or another person or group acquires more than 15% of outstanding common stock. stock. The plan would dilute that person’s possessions in a strategy commonly used to prevent unwanted acquisitions.

The board seemed to have two reasons to consider rejecting the deal. The first was that the offer, even though it was priced well above Twitter’s current stock price, was probably too low as it had recently risen above that price tag.

The second was that it was initially unclear how Musk would fund the deal. Despite being the richest person in the world, much of his wealth is tied up in Tesla shares, meaning he will likely have to borrow against his possessions to finance the deal.

But the offer became more concrete when Musk announced in an application from the Securities and Exchange Commission that he received commitments of $ 46.5 billion to help fund the potential deal. That included about $ 25.5 billion in debt financing from Morgan Stanley Senior Funding and other firms. He said he committed about $ 21 billion in equity financing.

Musk said in the same filing that he was investigating a takeover bid to buy shares in Twitter directly from shareholders.

Musk’s interest in Twitter comes from his own frequent use of the platform. The Tesla and SpaceX boss often uses his big platform to share jokes, engage with his 83.6 million followers and make business announcements.

The latter has gotten him into some trouble. He came under SEC investigation after tweeting in 2018 that he had secured financing at $ 420 per share to take Tesla privately. The agency charged Musk with securities fraud as a result of these tweets. Musk and Tesla reached a revised settlement agreement on these charges in 2019, which Musk is now trying to terminate.

Musk said at the TED2022 conference in Vancouver earlier this month that he had actually secured funding at the time of that tweet, adding that he was “forced to submit to the SEC illegally” in the settlement. The SEC declined to comment on Musk’s comments at the time.

Shortly after the conference, a lawsuit from a class action lawsuit from shareholders against Musk revealed that the judge presiding over the case concluded that Musk deliberately made false statements about the financing at the time of the tweet.

Also at the TED2022 conference, Musk shared how he would like to see the platform change under his ownership.

“I think it is very important that there is an inclusive arena for freedom of expression,” he said at the time, acknowledging that some content moderation would be needed to deal with explicit calls for violence and ensure that the service complies with the law. in the country. where it operates.

He also said he would generally prefer “time-outs” to permanent bans, which could point to a way for former President Donald Trump to rejoin the platform under Musk’s control. Twitter banned Trump from the platform after his tweets surrounding the January 6 uprising near the U.S. capital, citing “the risk of further incitement to violence.”

Some Republican lawmakers have expressed enthusiasm over the prospect of Musk owning the company after years of complaining about what they say is censorship of conservative voices from mainstream technology companies. Twitter and others have said they do not censor speech based on ideology, but instead enforce their stated guidelines for the community.

On Friday, Republicans in the House Judiciary Committee asked Twitter board members to keep records related to Musk’s bid, setting the stage for a potential congressional inquiry and subpoenas if the party regains control of the chamber after this year’s midterm elections.

Here is the full message from Twitter:

“Twitter, Inc. (NYSE: TWTR) announced today that it has entered into a final agreement to acquire an entity wholly owned by Elon Musk for $ 54.20 per share in cash in a transaction. to a value of approximately $ 44 billion.After the completion of the transaction, Twitter will become a privately held company.

Under the terms of the agreement, Twitter shareholders will receive $ 54.20 in cash for each share in Twitter’s ordinary shares they own at the close of the proposed transaction. The purchase price represents a premium of 38% compared to Twitter’s closing share price on April 1, 2022, which was the last trading day before Mr. Musk revealed his approximately 9% stake in Twitter.

Bret Taylor, Twitter’s independent chairman of the board, said: “The Twitter Board conducted a thoughtful and comprehensive process to evaluate Elon’s proposal with a conscious focus on value, security and financing. The proposed transaction will deliver a significant cash prize and we believe it is best way forward for Twitter shareholders. “

Parag Agrawal, Twitter’s CEO, said: “Twitter has a purpose and relevance that affects the whole world. Deeply proud of our teams and inspired by the work that has never been more important.”

“Freedom of speech is the foundation of a functioning democracy, and Twitter is the digital urban space where issues crucial to the future of humanity are discussed,” said Mr. Musk. “I also want to make Twitter better than ever by improving the product with new features, making the algorithms open source to increase trust, defeat spambots and authenticate all people. Twitter has enormous potential – I look forward to working with the company and community of users to unlock it. “

Transaction terms and financing

The transaction, which has been unanimously approved by Twitter’s Board of Directors, is expected to be completed in 2022, subject to the approval of Twitter shareholders, receipt of applicable regulatory approvals and fulfillment of other customary closing conditions.

Mr. Musk has secured $ 25.5 billion in fully committed debt and margin loan financing and provides an equity obligation of approx. $ 21.0 billion. There are no financing conditions to complete the transaction.

For more information on all terms and conditions contained in the final transaction agreement, please see Twitter’s current report on Form 8-K, which will be submitted in connection with the transaction.

Results for the first quarter of 2022

Twitter plans to announce its first-quarter fiscal year 2022 results before the market opens on April 28, 2022. In light of the pending transaction announced today, Twitter will not hold a similar conference call.

Advisors

Goldman Sachs & Co. LLC, JP Morgan and Allen & Co. acts as financial advisor to Twitter, and Wilson Sonsini Goodrich & Rosati, Professional Corporation and Simpson Thacher & Bartlett LLP act as legal advisor. Morgan Stanley serves as senior financial advisor to Mr. Musk. BofA Securities and Barclays also act as financial advisors. Skadden, Arps, Slate, Meagher & Flom LLP act as legal counsel. “

This story is evolving. Come back for updates.

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