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

The Twitter board had reached the end of the road.

It was April 24. Ten days earlier, Elon Musk, the world’s richest man, made an unsolicited offer to buy Twitter for $54.20 a share. Alarmed by the unexpected proposition and uncertain if the offer was real, the social media company had adopted a “poison pill”, a defensive maneuver to prevent Mr Musk from accumulating more of his shares.

But that Sunday, Twitter was running out of options. Mr. Musk had found funding for his bid and was goading the company with his tweets. And after hours of discussing and reviewing Twitter’s plans and finances, the questions the 11-member board grappled with — could the company be worth more than $54.20 per share? would another bidder emerge? – all led to an unsatisfactory answer: No.

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

“What I will tell you is that based on the analysis and perception of risk, certainty and value, the board of directors has unanimously decided that the offer of “Elon represented the best value for our shareholders,” said Bret Taylor, president of Twitter. more than 7,000 employees on Monday in a call the New York Times listened to.

A central mystery to Mr Musk’s acquisition of Twitter is how the company’s board went from installing a poison pill to agreeing to sell to him in just 11 days. In most megadeals, taking a poison pill leads to a prolonged fight. The tactic is a clear signal that a company intends to fight. Negotiations then drag on. Sometimes buyers leave.

But interviews with a dozen people familiar with the deal, who weren’t authorized to speak publicly, show how few options Twitter’s board had.

And while there are many types of buyers that business advisors are willing to fend off — the hostile, the aggressive, the weak and then ready to negotiate — Twitter has faced a buyer in person. of Mr. Musk who was not in any playbook. Essentially, he was an “unknown quantity” acquirer, an acquirer who stood still on price and was willing to publicly trash the business and use his considerable fortune to enter into an agreement with limited diligence.

“Normal buyers might actually say, ‘Well, you know, we actually want to talk to people inside and see how the business is doing and get more data than is available to the public,'” a said Edward Rock, a professor of corporate governance at New York University School of Law. “What was interesting,” he said, was that Twitter’s board “has reached an agreement in a short time – and an unconditional agreement”. He described the speed of the agreement as “unusual”.

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

The groundwork for a deal was laid in January, when Mr. Musk began buying Twitter shares, eventually building up a more than 9% stake in the company. When he publicized his holdings in a securities filing in early April, Twitter offered him a seat on the board. Mr Musk briefly agreed to the idea before changing his mind.

Instead, on the evening of April 13, Mr. Musk texted Mr. Taylor, who has been president of Twitter since 2016. (Mr. Taylor is also co-CEO of software company Salesforce.)

“I will send you an offer letter tonight, it will be public in the morning,” Mr. Musk wrote to Mr. Taylor. The exchange was included in a securities filing.

The next morning, a simple letter of offer arrived from Mr. Musk. He said he intended to buy Twitter for $54.20 a share, but had few details about his plans for the company or the funding.

Mr Musk hired the investment bank Morgan Stanley, bringing in the services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, who heads Morgan Stanley’s tech banking practice, led the takeover bid for shares of Facebook and other tech companies in 2012, while Mr. Armstrong was a longtime tech banker who had recently been promoted to vice president of the company.

Twitter’s board was unsure how to handle Mr. Musk’s offer, people familiar with the discussions said. Mr. Musk had no history of buying businesses and failed to follow through on some deals, including one in 2018 when he tweeted that he would take his automaker, Tesla, private, but did not. didn’t.

A day after Mr Musk’s offer became public, Twitter’s board voted unanimously to slow him down by authorizing the poison pill. To defend itself, Twitter turned to Goldman Sachs, its longtime banker, and JPMorgan Chase. For legal advice, he added the law firm of Simpson Thacher & Bartlett to complement his longtime law firm, Wilson Sonsini.

JPMorgan declined to comment. Morgan Stanley, Goldman Sachs and Simpson Thacher did not immediately comment.

Mr. Musk was undeterred. Its bankers began trying to marshal tens of billions of dollars in funding for a deal on Twitter. His advisers presented potential lenders with a few pages vaguely outlining Mr. Musk’s goals. The billionaire also spoke directly with the banks, a person familiar with the calls said.

It helped persuade Citigroup, Bank of America, BNP Paribas and other banks to invest their money. Despite the lack of details about Mr. Musk’s plans, lenders were partly reassured by the entrepreneur’s past successes and wealth, the person said.

Mr Musk also campaigned on Twitter for a deal. He hinted that he would take his proposal directly to shareholders in a so-called takeover bid if the company’s board did not accept his offer. On April 16, he tweeted, “Love me tenderly.” Three days later he tweeted “____ is the night”, a reference to F. Scott Fitzgerald’s novel, “Tender Is the Night”.

Twitter’s board has fractured. On April 16, Jack Dorsey, a Twitter founder who stepped down as chief executive in November and is a board member, tweeted that the board had been the “constant dysfunction of the company”. Asked by a Twitter user if he was allowed to say that, Mr Dorsey replied “no”.

Mr Dorsey’s criticism has upset other board members and Twitter executives, two people who worked on the deal said. Mr Taylor asked Mr Dorsey to stop tweeting negatively, one person said. Mr. Dorsey continued publish references on Twitter’s board.

A spokesperson for Mr Dorsey declined to comment. A spokeswoman for Mr. Taylor declined to comment.

On April 21, Mr. Musk lined up $46.5 billion in funding. He had secured commitments from Morgan Stanley and other lenders for $13 billion in debt financing, while another group of banks had pledged $12.5 billion in loans against his Tesla stock. Mr. Musk added that he would use an additional $21 billion in cash to buy the rest of Twitter’s equity.

The funding forced Twitter’s board to take Mr. Musk seriously. No other bids for the company have emerged, said two people familiar with the deliberations.

On Twitter, Mr Taylor weighed employee uncertainty and the societal implications of a deal against the board’s fiduciary duty, people with knowledge of the situation said. This involved making a decision based on whether Twitter could reasonably achieve a better value than that proposed by Mr. Musk.

Mr. Taylor and other board members questioned whether Twitter’s prospects for user and revenue growth were realistic. The San Francisco company, which had not made a profit for eight of the last 10 years, had set ambitious business goals.

Twitter had also initially benefited from the pandemic, attracting a wave of new users and sending its stock to over $77 in February 2021. But its advertising business lagged behind that of its competitors, and as the surge in the pandemic was fading, its shares fell below $40.

Still, some board members feared having a life-saving figure like Mr. Musk, especially since Twitter had relied on such figures in the past – including Mr. Dorsey – to right the ship, have said. said two people.

Mr. Musk began preparing to launch a takeover bid on Twitter, a person familiar with the talks said. He had a potential ally on Twitter’s board in Egon Durban, a co-chief executive of private equity firm Silver Lake, who had worked with Mr. Musk on his failed 2018 effort to take Tesla private. But Mr. Durban made it clear to the board that Silver Lake was not partnering with Mr. Musk to fund a takeover, 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 launch a hostile bid, a person familiar with the call said.

On Sunday, Twitter’s board concluded that it needed to strike a deal with Mr Musk. The company couldn’t hit $54.20 a share on its own, board members agreed, and no white knights were coming.

Mr. Taylor told Mr. Musk that Twitter would conduct a sale, a person with knowledge of the call said. Even so, Mr. Musk sent a letter to Mr. Taylor threatening a hostile bid.

Twitter advisers focused on the deal’s protections, like a break fee if Mr. Musk walks away and a six-month time frame to complete the deal, which could be particularly important if tech stocks continue down. Mr. Musk’s advisers fleshed out the details of the funding, with the billionaire personally signing off on every point, a person familiar with the negotiations said.

After the deal was announced on Monday afternoon, Mr. Musk performed a lap of honor.

“Yes!!!” he tweeted, posting emojis of rockets, stars and hearts.

Anupreeta Das, Maureen Farrel and Kate Conger contributed report.

Leave a Reply

Your email address will not be published.