How Twitter’s Board Goes From Fighting Elon Musk To Accepting Him

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

It was April 24. Ten days earlier, Elon Musk, the richest man in the world, made an unsolicited auction to buy back Twitter for $54.20 a share. Warned by the outlandish proposal and unsure if the offer was genuine, the social media company adopted a “poison dose,” a defensive measure to prevent Musk from accumulating more shares. your vote.

But by that Sunday, Twitter had run out of options. Mr. Musk has already financed his offer and is luring the company with his tweets. And after hours of discussion and review of Twitter’s plans and finances, the question 11 board members are grappling with – can the company be worth more than $54.20 a share? ? Will any other bidders show up? – all lead to an unsatisfactory answer: No.

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

“What I will 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 the investors. our shareholders,” Bret Taylor, Twitter’s president, told the company added more than 7,000 employees Monday in a call that The New York Times listened to.

A major mystery in Mr. Musk’s Twitter acquisition 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 megadeals, the use of a poison pill leads to a protracted fight. This tactic is a clear signal that a company intends to go to war. The negotiations then dragged out. Sometimes buyers walk away.

But interviews with dozens of people close to the transaction, who were not authorized to speak publicly, showed Twitter’s board of directors had little choice.

And while there are many types of buyers that trading advisors are willing to fend for — the hostile, the aggressive, the condescending, and the willing to negotiate — Twitter has faced one buyer. to Mr. Musk, who is not in any of the deal books. In essence, he is an “unspecified” acquirer, someone who is resistant to price swings and is willing to go public with the company and use his substantial assets to strike a deal. with limited diligence.

“Ordinary buyers can really say, ‘Well, you know, we really want to talk to the people inside and see how the business goes and get a lot more data than the people who do. what is available to the public,’ ‘Edward Rock, a corporate professor. Administration at New York University School of Law. “What’s interesting is that the Twitter board” has reached an agreement in such a short period of time – and such an unconditional agreement,” he said. He called the speed of the deal “extraordinary.”

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

The basis for a deal was laid in January, when Musk started buying shares of Twitter, eventually building up more than 9% of the company. When he announced his fortune in a stock filing in early April, Twitter offered him a seat on the board. Mr. Musk agreed briefly before changing his mind.

Instead, on the evening of April 13, Mr. Musk sent a text message to Mr. Taylor, who has served as Twitter’s chairman since 2016. (Mr. Taylor is also the software company’s co-CEO. Salesforce.)

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

The next morning, Musk received a crude job offer. It announced his intention to buy Twitter for $54.20 a share, but it had very few details about his plans for the company or its financing.

Mr. Musk hired investment bank Morgan Stanley, exploiting the services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, head of technology banking at Morgan Stanley, led the 2012 public offerings of Facebook and other tech companies, while Mr. Armstrong was a public banker. Longtime technologist, who has just been promoted to vice president of the company.

Twitter’s board did not know how to handle Mr. Musk’s bid, people with knowledge of the discussions said. Mr. Musk has no track record of acquiring companies and did not make some, including one in 2018 when he tweeted that he would buy his automaker, Tesla, but then did not do so.

A day after Musk’s bid went public, Twitter’s board voted unanimously to slow his pace by authorizing the use of poison. To protect itself, Twitter turned to Goldman Sachs, its longtime banker, and JPMorgan Chase. For legal advice, it added the law firm Simpson Thacher & Bartlett to complement its longtime law firm, Wilson Sonsini.

JPMorgan declined to comment. Morgan Stanley, Goldman Sachs and Simpson Thacher were not immediately available for comment.

Mr. Musk is not discouraged. His bankers began trying to raise tens of billions of dollars in funding for a deal on Twitter. His advisers presented potential lenders with a few pages that vaguely outline Mr. Musk’s goals. The billionaire has also spoken directly to the banks, said a person with knowledge of the calls.

That helped convince Citigroup, Bank of America, BNP Paribas and others to pour money in.

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

Twitter’s board of directors is 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 was “consistently dysfunctional of the company.” When asked by a Twitter user if he was allowed to say that, Mr Dorsey replied: “No.”

Mr. Dorsey’s criticisms drew ratings from 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 post references for Twitter’s board of directors.

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

On April 21, Mr. Musk lined up $46.5 billion in financing. He received pledges from Morgan Stanley and other lenders for $13 billion in debt financing, while another group of banks promised a $12.5 billion loan against his stock in Tesla. Musk added that he would use another $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 offers for the company have emerged, two people familiar with the discussions said.

At Twitter, Mr Taylor weighed the employee uncertainty and social impact of a deal against the board’s fiduciary obligations, people with knowledge of the situation said. That means making decisions based on whether Twitter can reasonably achieve better value than Mr. Musk has reasonably offered.

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

Twitter also benefited initially from the pandemic, attracting a large chunk of new users and taking its stock to more than $77 by February 2021. But its advertising business lagged behind those of the mainstream. competitors, and when the pandemic broke, its stock fell below $40.

Some board members, however, remain wary of having a savior-like figure like Mr Musk come in, especially since Twitter has relied on such figures – including Mr. – to run the ship, the two said.

Musk began preparing to start a public bid on Twitter, a person familiar with the discussions said. He has a potential ally on Twitter’s board in Egon Durban, the co-CEO of private equity firm Silver Lake, who worked with Mr. Musk on a failed 2018 effort to bring Tesla goes private. But Mr. Durban made it clear to the board that Silver Lake was not working with Mr. Musk to finance the takeover, the two people said.

Through a spokesman, Mr. Durban declined to comment.

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

On Sunday, Twitter’s board concluded that it must make a deal with Mr. Musk. The company couldn’t reach $54.20 a share on its own, board members agreed, and no white knights came.

Mr. Taylor told Mr. Musk that Twitter would go ahead with the 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 focus on safeguards for the deal, such as a break-up fee if Musk leaves and a six-month deadline to close the deal, which could be especially important if the stock technology continues to decline. A person familiar with the negotiations said:

After the deal was announced on Monday afternoon, Mr Musk won.

“Yes!” he tweeted, posting rocket, star, and heart emojis.

Anupreeta Das, Maureen Farrell and Kate Conger contribution report.