How Twitter’s board went from fighting Elon Musk to accepting it

The Twitter board has come to the end of the road.

That was on April 24th. Ten days ago, Elon Musk, the world’s richest man, made an unsolicited offer to buy Twitter for $54.20 a share. Disturbed by the unfamiliar offer and unsure whether the offer is real, the social media company has adopted a “toxic pill,” a defensive maneuver to prevent Mr. Musk from accumulating more of its stock.

But by that Sunday, Twitter was running out of options. Mr. Musk had raised funds for his show and was tweeting to the company. And after hours of discussions and reviewing Twitter’s plans and finances, the questions the 11 board members were grappling with — could the company be worth more than $54.20 a share? Will any other viewer appear? They all lead to one unsatisfactory answer: No.

Less than 24 hours later, the massive $44 billion deal was announced.

“What I will tell you is that based on analysis and perception of risk, certainty, and value, the Board of Directors has unanimously determined that Elon’s offering represents the best value for our shareholders,” Brett Taylor, Twitter’s chairman, told the company’s more than 7,000 employees Monday in a call I heard. The New York Times.

The central mystery of Mr. Musk’s takeover of Twitter is how the company’s board of directors went from installing a toxic pill to agreeing to sell it to him in just 11 days. In most mega deals, the use of toxic pills leads to a protracted battle. This tactic is a clear indication that the company intends to fight back. Then the negotiations go on. Sometimes buyers walk away.

But interviews with dozens of people close to the deal, who were not authorized to speak publicly, show how few options exist for Twitter’s board of directors.

And while there are many types of buyers that deal advisors are willing to fend off — hostile, aggressive advisors, and those who flounder and are then willing to negotiate — Twitter encountered an acquirer in Mr. Musk who wasn’t in any evidence of a deal. In essence, he was a acquirer of “an unknown quantity”, someone who would not budge on the price and was willing to publicly destroy the company and take advantage of his considerable fortune to secure a deal with limited diligence.

said Edward Rock, a professor in Corporate Governance at New York University School of Law. What was interesting, he said, was that the Twitter board “reached an agreement in a short period of time – and this unconditional deal.” He described the speed of the deal as “extraordinary.”

Twitter declined to comment on its board discussions. Mr. Musk did not respond to a request for comment.

The groundwork for the deal was laid in January, when Mr. Musk began buying Twitter shares, eventually building more than 9 percent of the company’s stock. When he announced his holdings in a securities filing in early April, Twitter offered him a seat on the board. Mr. Musk briefly accepted the idea before changing his mind.

Instead, on the evening of April 13, Mr. Musk sent a text message to Mr. Taylor, who has been Twitter’s chairman since 2016. (Mr. Taylor is also the co-CEO of software company Salesforce).

“I will send you a letter of offer tonight, and it will be available to all in the morning,” Mr. Musk wrote to Mr. Taylor. The stock exchange is included in the securities deposit.

The next morning, a letter arrived from Mr. Musk. He announced his intention to buy Twitter for $54.20 a share, but has few details about his plans for the company or financing.

Mr. Musk hired investment bank Morgan Stanley, using the services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, who heads Morgan Stanley’s technology banking practice, led the 2012 public stock offering of Facebook and other technology companies, while Mr. Armstrong is a longtime tech banker who was recently promoted to corporate vice president.

People familiar with the discussions said Twitter’s board did not know exactly how to handle Mr. Musk’s offer. Mr. Musk did not have a track record of buying companies and did not pursue some deals, including one in 2018 when he tweeted that he would take his automaker, Tesla, private but then did not.

A day after the announcement of Mr. Musk’s attempt, Twitter’s board of directors voted unanimously to slow him down by allowing the toxic pill. To defend itself, Twitter turned to Goldman Sachs, its longtime banker, and JPMorgan Chase. For legal advice, Simpson law firm added Thacher & Bartlett to supplement its longtime law firm, Wilson Sonsini.

JPMorgan declined to comment. Morgan Stanley, Goldman Sachs, and Simpson Thacher had no immediate comments.

Mr. Musk was unchecked. His bankers began trying to raise tens of billions of dollars to fund a deal on Twitter. His advisors gave potential lenders a few pages that vaguely outlined Mr. Musk’s goals. A person familiar with the calls said the billionaire also spoke directly with the banks.

This helped convince Citigroup, Bank of America, BNP Paribas and other banks to put their money in. Although there were no details about Mr. Musk’s plans, the lenders were partly reassured by the businessman’s past successes and wealth, the person said.

Mr. Musk also campaigned on Twitter to reach a deal. He hinted that he would take his offer directly to the shareholders in the so-called bid offer if the company’s board of directors did not accept his offer. On April 16, he said chirp, “Love me tender.” Three days later, he chirp “____ is the night,” referring to F. Scott Fitzgerald’s novel, “Giving is the night.”

Twitter’s board of directors is broken. On April 16, Jack Dorsey, the founder of Twitter who stepped down as CEO in November and a member of the Board of Directors, chirp That the board of directors was a “persistent imbalance in the performance of the company.” When asked by a Twitter user if he was allowed to say that, Mr. Dorsey replied, “No.”

Two people who worked on the deal said Mr. Dorsey’s criticism had angered other board members and Twitter executives. Mr. Taylor asked Mr. Dorsey to stop tweeting negatively, one person said. Follow Mr. Dorsey Publish references To the Twitter Board of Directors.

Dorsey’s spokesman declined to comment. A spokeswoman for Mr. Taylor declined to comment.

On April 21, Mr. Musk raised $46.5 billion in funding. He has secured commitments from Morgan Stanley and other lenders worth $13 billion to finance debt, while another group of banks has promised $12.5 billion in loans in return for his Tesla shares. Mr. Musk added that he will use another $21 billion in cash to buy the rest of Twitter’s stock.

The funding forced the Twitter board to take Mr. Musk seriously. Two people familiar with the deliberations said no further offers had emerged from the company.

On Twitter, Mr. Taylor weighed employee uncertainty and the societal implications of the deal against the board’s fiduciary duty, people familiar with the situation said. This means making a decision based on whether Twitter can achieve reasonably better value than Mr. Musk has put forward.

Mr. Taylor and other members of the Board of Directors discussed whether the prospects for Twitter user and revenue growth are realistic. The San Francisco company, which has not turned in a profit for eight of the past 10 years, has set strong business goals.

Twitter also initially benefited from the pandemic, attracting a slew of new users and sending its stock over $77 in February 2021. But its advertising activity lagged behind that of competitors, and as the pandemic boost faded, its stock fell below $40.

However, some board members were concerned about having a savior like Mr. Musk, especially since Twitter had already relied on such numbers – including Mr. Dorsey – to correct the ship, two people said.

Mr. Musk has begun preparing to start bidding for Twitter, said a person close to the discussions. He had a potential ally on the Twitter board of Egon Durban, co-CEO of private equity firm Silver Lake, who worked with Mr. Musk in his failed 2018 bid to make Tesla private. But Mr. Durban made it clear to the board that Silver Lake had not cooperated with Mr. Musk to provide financing for the acquisition, two people said.

Through a spokesperson, Mr. Durban declined to comment.

Last Saturday, Mr. Musk spoke with Mr. Taylor and threatened to take his offer directly to Twitter shareholders, without explicitly saying he would initiate a hostile bid, a person familiar with the call said.

On Sunday, Twitter’s board concluded it had to strike a deal with Mr. Musk. Board members agreed that the company couldn’t hit $54.20 a share on its own, and there was no white knight coming.

Mr. Taylor told Mr. Musk that Twitter would proceed with the sale, a person familiar with the call said. However, Mr. Musk sent a letter to Mr. Taylor threatening a hostile attempt.

Twitter advisers invoked deal protections, such as breakup fees if Mr. Musk pulls out, and a six-month timeline for closing the deal, which could be especially important if tech stocks continue to slide. A person familiar with the negotiations said Mr Musk’s advisers backed the financing details, with the billionaire personally signing off on each point.

After the agreement was announced on Monday afternoon, Mr. Musk took a victory lap.

“yes !!!” He tweeted, posting emojis of rockets, stars, and hearts.

Anuprita DasAnd Maureen Farrell And Kate Conger Contribute to the preparation of reports.

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