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How Twitter’s board of directors went from fighting Elon Musk to embracing him

The Twitter board had reached the end of the road.

It was April 24. Ten days earlier, Elon Musk, the world’s richest man, made an unsolicited offer to buy Twitter for $54.20 a share. Alarmed by the unexpected proposal and not knowing if the offer was real, the social media company adopted a “poison pill,” a defensive move to prevent Musk from racking up more shares.

But that Sunday, Twitter was running out of options. Musk had raised funding for the bid from him and was upsetting the company with his tweets. And after hours of discussions and review of Twitter’s plans and finances, the questions the 11 board members wrestled with: Could the company be worth more than $54.20 a share? Will another bidder come up? — all led to an unsatisfactory answer: No.

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

“What I will tell you 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,” said Bret Taylor, president of Twitter, to the company plus more than 7,000 employees Monday in a call heard by The New York Times.

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, taking a poison pill leads to a protracted fight. The tactic is a clear sign that a company intends to fight back. The negotiations then drag on. Sometimes the buyers leave.

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

And while there are many types of buyers that deal advisers are prepared to defend against (the hostile ones, the aggressive ones, the ones who down the ante and then are willing to deal), Twitter faced an acquirer in Mr. Musk that didn’t was in no deal playbook. In essence, he was an “unknown quantity” acquirer, one who would not budge on price and was prepared to publicly trash the company and use his considerable fortune to close a deal with limited diligence.

“Normal buyers might actually say, ‘Well, we actually want to talk to the insiders and see how the business is going and get more data than is available to the public,'” said Edward Rock, a professor of corporate law. . governance at New York University School of Law. “What was interesting,” he said, is that Twitter’s 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 its board discussions. Musk did not respond to a request for comment.

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

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

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

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

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

Twitter’s board wasn’t quite sure how to handle Musk’s offer, the people with knowledge of the discussions said. Musk had no history of buying companies and had reneged 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 was made public, Twitter’s board of directors voted unanimously to delay it from authorizing the poison pill. To defend itself, Twitter turned to Goldman Sachs, its former banker, and JPMorgan Chase. For legal advice, he added the law firm of Simpson Thacher & Bartlett to complement his longtime law firm of Wilson Sonsini.

JPMorgan declined to comment. Morgan Stanley, Goldman Sachs and Simpson Thacher had no immediate comment.

Musk was not intimidated. His bankers began trying to raise tens of billions of dollars in financing for a Twitter deal. His advisers presented potential lenders with a few pages that vaguely described Musk’s goals. The billionaire also spoke directly to the banks, a person with knowledge of the calls said.

That helped persuade Citigroup, Bank of America, BNP Paribas and other banks to invest their money. Despite the lack of details about Musk’s plans, lenders were reassured in part by the entrepreneur’s past successes and wealth, 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 offer if the company’s board did not accept his offer. On April 16, he tweeted, “Love me Tender.” Three days later he tweeted “____ is the night”, a reference to the F. Scott Fitzgerald novel, “Tender Is the Night”.

The Twitter dashboard is fractured. On April 16, Jack Dorsey, a Twitter founder who stepped down as CEO in November and is a member of the board, tweeted that the board had been the “constant dysfunction of the company.” Asked by a Twitter user if he was allowed to say that, Dorsey replied “no.”

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

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

On April 21, Musk raised $46.5 billion in financing. He had obtained commitments from Morgan Stanley and other lenders for $13 billion in debt financing, while another group of banks pledged $12.5 billion in loans against his shares in Tesla. Musk added that he would use another $21 billion in cash to buy the rest of Twitter’s stock.

The funding forced Twitter’s board to take Musk seriously. No other offer for the company had come up, two people familiar with the deliberations said.

On Twitter, Taylor weighed employee uncertainty and the social implications of a deal against 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 Musk had presented.

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

Twitter had also initially benefited from the pandemic, attracting a surge of new users and pushing its shares above $77 in February 2021. But its advertising business lagged behind that of its competitors, and when the momentum of the pandemic faded, its shares fell below $40.

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

Musk has started preparing to launch a public offering over Twitter, a person close to the discussions said. He had a potential ally on Twitter’s board in Egon Durban, co-CEO 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 would not partner with Musk to provide financing for an acquisition, two people said.

Through a spokesman, Mr. Durban declined to comment.

Last Saturday, Musk spoke with 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 had to make a deal with Musk. The company couldn’t reach $54.20 a share on its own, board members agreed, and no white knights were coming.

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

Twitter advisers focused on protections for the deal, such as a break fee if Musk backs out and a six-month window to close the deal, which could be particularly important if tech shares continue to slide. Musk’s advisers have tightened the financial details and the billionaire personally signed off on each item, a person familiar with the negotiations said.

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

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

Anupreeta Das, maureen farrell Y kate conger contributed report.