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

Twitter’s board of directors had come to the end of the road.

It was April 24. Ten days ago, the richest man in the world, Elon Musk, Unsolicited offer to buy Twitter $54.20 per share. Alarmed by the unexpected offer and uncertain whether the offer is real, the social media company said, “poison pill” is a defensive maneuver to stop Mr. Musk from accumulating more of his stock.

But that Sunday, Twitter was running out of options. Mr. Musk had secured funding for his proposal and needed the company with his tweets. After hours of discussion and reviewing Twitter’s plans and finances, the questions 11 board members grappled with – could the company be worth more than $54.20 per share? Any other bidders? – all leading to one unsatisfactory answer: No.

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

“What I’m going to tell you is that, based on analysis and perception of risk, certainty and value, the board unanimously decided that the offer from Elon represents the best value for our shareholders,” said Bret Taylor, chairman of Twitter. More than 7,000 employees in a call that the New York Times heard on Monday.

The core mystery of Mr. Musk’s acquisition of Twitter is how the company’s board agreed to sell him in just 11 days from placing a poison pill. In most megadeals, the adoption of a poison pill leads to a protracted fight. A tactic is a clear sign that a company is intent on fighting. 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 little choice Twitter’s board has.

And while there were many types of buyers that deal advisors were prepared to fend off—the hostile, the aggressive, the low-ball and then willing to negotiate—Twitter faced a buyer in Mr. Musk who was not involved in any deal scenario. In essence, he was a buyer of an “unknown amount,” an uncompromising man who was ready to trash the company publicly and use his considerable wealth to strike a deal with limited care.

“Normal buyers might actually say, ‘Well, you know, we actually want to talk to people inside and see how things go and get more data than is publicly available,'” he said. administration at the New York University School of Law. “The interesting thing,” said Twitter’s board, “is that it soon came to an agreement – and such an unconditional agreement.” He described the pace of the deal as “unusual”.

Twitter declined to comment on the 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. more than 9 percent shares in the company. When he reported his holdings in a securities filing in early April, Twitter offered him a board seat. Mr. Musk briefly accepted the idea before. change your mind.

Instead, on the evening of April 13, Mr. Musk sent a text message to Mr. Taylor, who has been the head of Twitter since 2016.

“I will send you an offer letter tonight, it will be available to the public in the morning,” Mr. Musk told Mr. Taylor. Change included filing of securities.

The next morning, a naked offer letter arrived from Mr. Musk. It announced its intention to acquire Twitter for $54.20 per share, but there were few details about its plans for the company or its financing.

Mr. Musk hired investment bank Morgan Stanley, using the services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, head of Morgan Stanley’s technology banking practice, oversaw the 2012 IPO of Facebook and other tech companies, while Mr. Armstrong was a longtime technology banker and had recently been promoted to vice president of the company.

People familiar with the discussions said the Twitter board wasn’t quite sure how to handle Mr. Musk’s offer. Mr. Musk had no track record of buying the company, and he hadn’t followed through on some deals, including a deal, when he tweeted in 2018 that the automaker would take Tesla privately. he didn’t do that.

A day after Mr. Musk’s proposal was made public, the Twitter board unanimously said: poison pill. In self-defense, Twitter turned to its longtime banker Goldman Sachs and JPMorgan Chase. He added law firm Simpson Thacher & Bartlett, in addition to longstanding law firm Wilson Sonsini, for legal advice.

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

Mr. Musk was undeterred. The bankers started trying to finance tens of billions of dollars For the Twitter deal. His advisors offered prospective lenders several pages that vaguely outlined Mr. Musk’s goals. One person familiar with the talks said that the billionaire also spoke directly to the banks.

This helped persuade Citigroup, Bank of America, BNP Paribas and other banks to invest their money. While details were not provided about Musk’s plans, lenders were partially assured by the entrepreneur’s past successes and wealth, the person said.

Mr. Musk also campaigned on Twitter for a deal. He hinted that if the company’s board of directors didn’t accept his offer, he would take his offer directly to shareholders in a so-called tender offer. On April 16 he tweeted out“Love me tender.” three days later he tweeted out “____ is the Night” is a reference to the novel “Tender Is the Night” by F. Scott Fitzgerald.

Twitter’s clipboard is broken. On April 16, Twitter founder Jack Dorsey, resigned from his position as general manager in November and a member of the board of directors, tweeted out He said the board of directors was “constant dysfunction of the company”. When asked by a Twitter user whether he was allowed to say this, Mr. Dorsey replied “no”.

Mr Dorsey’s criticism listed the two people working on the deal, other board members and Twitter executives. One person said Mr Taylor asked Mr Dorsey to stop tweeting negatively. Mr Dorsey continued sending references Twitter’s board of directors.

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

On April 21, Mr. Musk queued up $46.5 billion financing. It had received commitments from Morgan Stanley and other lenders. 13 billion dollars in debt financing, another group of banks has promised $12.5 billion On loans against his stake in Tesla. Mr Musk added that he will use another one. 21 billion dollars In cash to buy the rest of Twitter’s equity.

The funding forced the Twitter board to take Mr. Musk seriously. Two people familiar with the negotiations said there were no other offers for the company.

On Twitter, Mr. Taylor weighted employee uncertainty and those with knowledge of the situation said an agreement against the board’s trusteeship had societal implications. This meant making a decision based on whether Twitter could get better value than what Mr.

Mr. Taylor and other board members debated whether Twitter’s expectations of user and revenue growth were realistic. The San Francisco company, which has failed to make a profit in eight of the last 10 years, has set aggressive business goals.

Twitter also initially took advantage of the pandemic, attracting new users and raising its shares to over $77 in February 2021. But its advertising business has lagged behind its rivals, and its shares fell below $40 as the impact of the pandemic surge waned.

Still, some board members were wary of having a redemptive figure like Mr. Musk step in, especially since Twitter relied on such numbers – including Mr. Dorsey – to fix the ship, the two said.

A person close to the talks said Musk is starting to prepare to launch a tender offer for Twitter. Twitter had a potential ally on its board. Egon Durbanis the co-chief executive of private equity firm Silver Lake, who teamed up with Mr. Musk in his unsuccessful 2018 effort to take Tesla private. But Mr. Durban has made it clear to the board that Silver Lake is not working with Mr. Musk to raise financing for an acquisition, the two said.

Through a spokesperson, Mr. Durban declined to comment.

Last Saturday, Mr. Musk spoke to Mr. Taylor and threatened to take his offer directly to Twitter’s shareholders, but didn’t say he would openly launch a hostile offer, one person familiar with the call said.

On Sunday, Twitter’s board concluded it had to strike a deal with Mr Musk. The company failed to hit $54.20 per share alone, board members agreed, and the white knight wasn’t coming.

One person familiar with the conversation said Mr Taylor told Mr Musk that Twitter would go ahead with a sale. Despite this, Mr. Musk sent a letter to Mr. Taylor threatening a hostile offer.

Twitter’s advisors have put in place safeguards for the deal. separation fee If Mr. Musk walks out and a six-month timeline to close the deal could be particularly important if tech stocks continue to fall. A person familiar with the negotiations said Mr. Musk’s advisors backed the financing details by personally signing each point of the billionaire.

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

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

Anupréeta Das, Maureen Farrell and Kate Conger contributing reporting.