The market was surprised when Tesla’s Elon Musk revealed on April 4 that he became Twitter’s largest shareholder and had no inkling that he would buy the entire company for $45.5 billion within three weeks.
According to Statista, A a leading provider of market and consumer data, Musk’s acquisition of Twitter is one of the largest leveraged buyouts in history (see graph).
According to Twitter’s announcement of the deal, Musk has secured $25.5 billion in loans, backed in part by his own assets and in part by Twitter’s assets, to finance the deal. He will also be providing roughly $21 billion in cash, although it his yet unclear how he plans to raise that amount, Statista said.
On the other hand, Twitter announced that it has entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash in a transaction valued at approximately $44 billion. Upon completion of the transaction, Twitter will become a privately held company.
Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction. The purchase price represents a 38% premium to Twitter’s closing stock price on 1 April 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter.
Best Path Forward
Bret Taylor, Twitter’s Independent Board Chair, said: “The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”
Parag Agrawal, Twitter’s CEO, said: “Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.”
In his comments, Musk said: “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated. I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”
Terms and Financing
The transaction, which has been unanimously approved by the Twitter Board of Directors, is expected to close in 2022, subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions.
Musk has secured $25.5 billion of fully committed debt and margin loan financing and is providing an approximately $21.0 billion equity commitment. There are no financing conditions to the closing of the transaction.