How Twitter’s Board Went From Fighting Elon Musk to Accepting Him

Twitter’s advice has reached the end of the road.

It was April 24th. Ten days earlier, Elon Musk, the richest man in the world, made an unsolicited offer to buy Twitter at $54.20 a share. Alarmed by the unexpected proposal and uncertain whether the offer was real, the social media company adopted a “poison pill,” a defensive ploy to stop Musk from accumulating more stock.

But that Sunday, Twitter was running out of options. Musk had secured funding for his offer and was nudging the company with his tweets. And after hours of wrangling 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? would any other bidders emerge? – were all leading to an unsatisfactory answer: No.

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

“What I will say is that, based on the analysis and perception of risk, certainty and value, the board unanimously decided that Elon’s offer represented the best value for our shareholders,” Bret Taylor, president of Twitter, said in a statement. highest echelon of the company. more than 7,000 employees on Monday in a call The New York Times overheard.

A central mystery of Musk’s takeover of Twitter is how the company’s board went from installing a poison pill to agreeing to sell it to him in just 11 days. In most mega-deals, adopting a poison pill leads to a protracted struggle. The tactic is a clear sign that a company intends to struggle. The negotiations then drag on. Sometimes buyers walk away.

But interviews with a dozen people close to the transaction, who were not authorized to speak publicly, show how few options Twitter’s board had.

And while there are many types of buyers that business advisors are prepared to defend against — the hostile ones, the aggressive ones, the ones who play low and then are willing to trade — Twitter faced a buyer in Musk that wasn’t in any business playbook. . In essence, he was an “unknown quantity” buyer, someone who would not budge on price and was prepared to publicly destroy the company and use his considerable fortune to complete a deal with limited diligence.

“Normal buyers can really say, ‘Well, you know, we really want to talk to the insiders and see how the business is doing and get more data than is available to the public,’” said Edward Rock, professor of governance at New York University School of Law. “What was interesting,” he said, is that the Twitter board “reached an agreement in such a short period of time — and such an unconditional agreement.” He called the speed of the deal “unusual.”

Twitter declined to comment on the board’s discussions. Musk did not respond to a request for comment.

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

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

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

The next morning, a basic offer letter arrived from Mr. Musk. He stated his intention to buy Twitter for $54.20 a share, but had few details about his plans for the company or funding.

Musk hired investment bank Morgan Stanley, enlisting the services of two bankers, Anthony Armstrong and Michael Grimes. Grimes, who leads Morgan Stanley’s technology banking practice, led the public offering of shares in Facebook and other technology companies in 2012, while Armstrong was a longtime technology banker who had recently been promoted to vice president of company.

Twitter’s board wasn’t quite sure how to handle Musk’s offer, people with knowledge of the discussions said. Musk has no history of buying companies and has not followed through on some deals, including one in 2018 when he tweeted that he would take his automaker Tesla private, but then didn’t.

A day after Musk’s offer became public, Twitter’s board unanimously voted 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, it added law firm Simpson Thacher & Bartlett to complement its longtime law firm Wilson Sonsini.

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

Mr. Musk was not intimidated. Its bankers began trying to corral tens of billions of dollars in funding for a deal on Twitter. His advisers presented potential creditors with a few pages vaguely describing Musk’s goals. The billionaire also spoke directly to the banks, said a person with knowledge of the calls.

That helped persuade Citigroup, Bank of America, BNP Paribas and other banks to put in their money. Despite the lack of details about Musk’s plans, creditors were reassured in part by the businessman’s previous successes and riches, the person said.

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

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

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

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

As of April 21, Musk has secured $46.5 billion in funding. It has secured commitments from Morgan Stanley and other creditors for $13 billion in debt financing, while another group of banks pledged $12.5 billion in loans against its Tesla shares. Musk added that he would use another $21 billion in cash to buy the remainder of Twitter’s stock.

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

On Twitter, Taylor weighed employee uncertainty and the social implications of a settlement versus the board’s fiduciary duty, people with knowledge of the situation said. That meant making a decision based on whether Twitter could reasonably achieve a better value than what Musk had proposed.

Taylor and other board members debated whether Twitter’s user and revenue growth prospects were realistic. The San Francisco company, which has not made a profit in eight of the last 10 years, has set aggressive business goals.

Twitter also initially benefited from the pandemic, attracting a wave of new users and lifting its stock to more than $77 in February 2021. But its advertising business lagged behind competitors, and as the pandemic’s momentum wore off, Twitter did. its shares fell below $40.

Still, some board members were wary of having a savior figure like Musk, especially since Twitter had previously relied on such figures — including Dorsey — to fix the ship, two people said.

Musk has begun preparing to launch a takeover bid for Twitter, said a person close to the discussions. He had a potential ally on Twitter’s board in Egon Durban, a co-executive chairman of private equity firm Silver Lake, who had worked with Musk on his failed 2018 attempt to take Tesla private. But Durban made it clear to the board that Silver Lake was not teaming up with Musk to provide financing for an acquisition, two people said.

Through a spokesperson, Durban declined to comment.

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

On Sunday, Twitter’s board concluded it needed to make a deal with Musk. The company could not hit $54.20 a share alone, board members agreed, and no white knight was coming.

Taylor told Musk that Twitter would proceed with the sale, a person with knowledge of the call said. Even so, Musk sent Taylor a letter threatening a hostile offer.

Twitter advisers focused on protections for the deal, such as a separation fee if Musk backs out and a six-month deadline to close the deal, which could be particularly important if tech stocks continue to fall. Musk’s advisers beefed up the details of the funding, with the billionaire personally signing off on each point, said a person familiar with the negotiations.

After the deal was announced Monday afternoon, Musk took the victory lap.

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

Anupreeta Das, Maureen Farrell and Kate Conger contributed reports.

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