Elon Musk is buying out Twitter Inc. for $44 billion. After Musk bought a stake in the social media giant this month, this ends weeks of speculation.
The Monday announcement gave many details about the deal, and this contained much information that was already tweeted or reported before but did not answer any other questions.
The original bid by Musk was an all-cash deal for $54.20, which was non-negotiable. Musk stuck to his stand for a $43 billion value during the initial filing. Monday’s confirmation for the $44 Billion deal does not mean that there was some price adjustment to the shares but possibly a difference in the number of outstanding shares counted.
Information already known
The financing of this deal will be a leveraged buyout. Musk informed that he had raised $25.5 billion of debt and loan margin financing from about a dozen banks to back the bid. After completing the acquisition, Twitter Inc. is to become a privately held company.
The new owner of twitter will be an entity wholly owned by Musk, and no co-investors were named. The statement’s wording implies that if anyone joins in will remain as minority stakeholders.
JPMorgan Chase and Co. and Goldman Sachs Group Inc. are advising Twitter. On Monday, Allen & co. also joined the camp. Musk is advised by lead advisors Morgan Stanley and entered by Barclays Plc and Bank of America Corp.
It is not clear from Monday’s Statement whether any side has to pay a termination fee if the transaction does not go through. However, as per Bloomberg News, Musk will have to pay if he walks away or the deal falls apart. Usually, M&A deals of this size have break fees running into billions of dollars which acts as a deterrent and an incentive to make the deal succeed.
What is not known?
Musk has reiterated a commitment of $21 billion in equity; there are no details on where the balance financing will come from. With the deal becoming friendly, PE firms which usually stay away from hostile takeovers, may now go in there and write the check for Musk.
For this size, four to five firms join in as a syndicate. Some existing shareholders in Twitter may join the new private company of Musk. This will come as a relief to Tesla Inc. shareholders worried Musk might sell his stake in the EV Company to fund the Twitter buyout.
Both Chairman Bret Taylor and CEO Parag Agarwal are in their respective roles as per the statement. However, Musk has earlier expressed his dissatisfaction with the Board at Twitter and its run. It is common to have management changes when a company gets bought out. However, Musk, CEO of Tesla and SpaceX, will have limited capacity for a leadership role on Twitter.
