Twitter launches a poisonous pill to thwart Elon Musk’s $ 43 billion offer
Twitter has launched a defense against the acquisition of a poisonous pill to fend off a hostile $ 43 billion offer from billionaire Tesla CEO Elon Musk.
In the first sign that the social media company intends to fight Musk’s offer, Twitter said on Friday that its board of directors has unanimously adopted a one-year shareholder rights plan to “allow all shareholders to realize the full value of their investment in Twitter. ” .
The board’s aggressive move, designed to prevent Musk from building a stake of more than 15% in the open market, risks putting an end to the South African entrepreneur’s hopes of buying the social media company.
It comes when US private equity group Thoma Bravo also expressed interest in taking Twitter as a private individual in what would be Musk’s rival offer, although sources said it was in a very preliminary stage and no offer was made. .
Thoma Bravo and Twitter both declined to comment.
Musk said this week that his offer was “the best and most definitive”, adding that “if it is not accepted, I should reconsider my position as a shareholder.” A person close to Musk said he wouldn’t move to that position.
Under Twitter’s plan, existing shareholders will be able to buy stock at a discount if someone acquires more than 15% without board approval, diluting an unwelcome bidder.
Musk offered $ 54.20 a cash share for Twitter, valuing the company at $ 43.4 billion, just days after he took a 9% stake in the company to become one of its largest shareholders.
The Twitter board is concerned that if Musk builds a stake worth more than 15%, he could indirectly exert significant power over the company’s management even without an executive or director role.
The only way for him to take over Twitter now is through a mutually agreed deal, which is expected to carry a significantly higher price tag, a person close to the company’s board said.
Poison pills were developed as a defense strategy in the 1980s to protect companies from corporate raiders and have been widely criticized as a way for a company’s managers to take refuge against attacks. Subsequent legal challenges have reduced some of their effectiveness, and most academic studies have shown that while poison pills slow an unwanted takeover bid, they don’t usually prevent an eventual deal after a negotiation.
Twitter said the plan could reduce the likelihood of a hostile bidder “gaining control of Twitter through open market build-up without paying all shareholders an appropriate control premium,” as well as slowing any offers.
“The Rights Plan does not prevent the Board from engaging with the parties or accepting an acquisition proposal if the Board believes it is in the best interests of Twitter and its shareholders,” he added. The plan expires on April 23, 2023, it says.
After his participation was announced last week, Musk reached a preliminary agreement with the company to join its board of directors, only to reverse course on Monday with no explanation.
Musk then announced his offer Thursday in a regulatory filing in which he said it would unlock the company’s potential to be “the platform for free speech worldwide.” Included in the filing was a transcript of a message he sent to Twitter, saying, “It’s a high price and your shareholders will love it.”
The offering represents a 38% premium over Twitter’s share price as of April 1, three days before its stake went public, though it’s still 26% below its 12-month high.
It is unclear how exactly Musk would fund the deal. In an interview after the announcement, Musk said he has “sufficient resources” to do so and intends to retain as many shareholders as possible. However, he admitted: “I’m not sure I’ll actually be able to acquire it.”
Musk did not publicly address the poison pill counterattack on Friday, instead thanking his fans on Twitter for their “support” after voting in favor of his purchase of the company in an online poll run by a bitcoin newsletter.
Additional reportage by Antoine Gara in New York