It was one of the most frenzied and unpredictable takeover bids ever, with Elon Musk sealing a deal to acquire Twitter Inc for US$44 billion within weeks of anyone even knowing he was an investor.
A month ago, Musk’s main connection to the social media platform was as a prolific user. From there he outed himself as Twitter’s largest shareholder, before becoming a short-lived prospective board member, a hostile suitor and finally a successful dealmaker – tweeting dozens of times along the way.
The transaction came together at breakneck speed in part because Musk waived the chance to look at Twitter’s finances beyond what was publicly available, but also because that’s how the billionaire works. The 50-year-old Tesla Inc head was deeply involved in the details of the transaction, according to people familiar with the process. And because he was an individual investor unencumbered by a board or shareholders – unlike a corporate bidder – Musk was able to make many of the big decisions on his own.
This account of the Twitter takeover is based on interviews with more than half a dozen people directly involved with the transaction. Many of them echoed the same sentiment – that they had never seen a deal this big put together as quickly as this one in their entire careers. A representative for Twitter declined to comment on the details, while representatives for Musk didn’t immediately respond to requests for comment.
From the moment he disclosed his roughly nine percent stake in Twitter on April 4, Musk was seen as a potential adversary to Twitter’s board, employees and many of its users.
That set the stage for an uphill battle when he made his US$54.20-a-share bid public on April 14. Twitter immediately went into defensive mode and adopted a poison pill the following day. Musk’s tweets hinting at a tender offer also seemed to be designed to threaten the San Francisco-based company.
But the unlikely courtship had a few key turning points, allowing the world’s richest person to ingratiate himself with Twitter’s board, including Chairman Bret Taylor.
The first breakthrough was coming up with US$46.5 billion for the bid. After bringing on Morgan Stanley as his adviser, Musk was able to get a dozen banks to commit US$25.5 billion in debt financing. He pledged another US$21 billion in equity financing himself.
Doing video calls, making presentations and sharing parts of his vision for the future of Twitter helped the banks get comfortable working with him. There were also at least two consecutive weekends where advisers worked through a few sleepless nights. The code name for the bid was “Project X” at some of the banks involved. Musk, meanwhile, dialled in to calls from places like Texas, where Tesla is now based.
The second tactic Musk employed was appealing directly to Twitter shareholders late last week. After revealing he had financing in place, Musk brought his pitch to some of Twitter’s biggest active investors and urged them to pressure Twitter to engage, some of the people said. Some shareholders reached out to Twitter to say they wanted it to take the offer seriously, they said.
Twitter’s board, meanwhile – joined in some cases by management – set up meetings with eight to 10 of its investors to gauge shareholder views on a potential deal, one of the people said. Those meetings began before Musk made his financing commitments public.
The third catalyst that led to a deal was the role of the price, US$54.20, and how it compared with Twitter’s own growth prospects. The company’s advisers, which included Goldman Sachs Group Inc and JPMorgan Chase & Co, did a valuation analysis and presented it to the board last Friday, one of the people said. Musk’s camp didn’t get a look at those materials, though, given the decision to bypass reviewing Twitter’s books.
Twitter’s shares were trading well below Musk’s bid, with the stock closing at US$47.08 the previous day, and far from their US$70-plus highs of a year earlier. But the question was whether the stock could recover without taking the deal. The analysis didn’t paint an optimistic picture.
Twitter’s board concluded from the presentation that, based on where peers were trading, its shares wouldn’t reach Musk’s bid price anytime soon and they should take the offer.
Talks heat up
Once that analysis was completed, Taylor went to Musk. The chairman, whose day job is co-CEO of Salesforce Inc, stepped up discussions and the two sides worked toward an outline of the deal.
When Musk first revealed the bid, he described it as his “best and final” price, and that held true. During the talks, Twitter’s advisers didn’t succeed in getting a higher price. Twitter also didn’t get a go-shop period – where the company could solicit other offers. But Twitter’s advisers did secure a higher-than-average reverse breakup fee, giving Twitter’s board the confidence that Musk wouldn’t scrap the agreement on a whim.
Musk famously floated the idea of taking Tesla private in 2018, saying that funding was secured, only to shelve the plan a few weeks later. The episode drew lawsuits from investors and the US Securities and Exchange Commission and has loomed over Musk’s reputation.
But as negotiations with Twitter progressed, Musk was a sponge who soaked up banker lingo and then used it himself, the people involved in the deal said. He would sometimes email bankers directly to get their opinions on some elements of negotiations, such as termination fees, and weighed the pros and cons thoughtfully. One person said that while Musk has a public persona of shooting from the hip, in private he was curious, thoughtful and open to feedback.
by Michelle F Davis and Liana Baker, Bloomberg