Twitter’s board unanimously approved on 25 April 2022 a sale to Elon Musk at $54.20 a share. What the agreement includes and what is needed to close it.
On 25 April 2022 Twitter announced a definitive agreement to be acquired by a company wholly owned by Elon Musk. The board of directors approved it unanimously. Musk will pay $54.20 in cash for each share, valuing the deal at about $44 billion, and the company will become private when it is completed. Twitter was advised by Goldman Sachs, J.P. Morgan and Allen & Co., and Musk by Morgan Stanley, BofA Securities and Barclays.
How the deal came about
The agreement came after almost a month of twists. In early April, Musk revealed a stake of about 9% and it was announced that he would join the board; he then decided against it and, in mid-month, offered to buy the whole company and take it off the stock market, arguing that in its current form it would neither thrive nor serve its social role. The board responded with a poison pill, an anti-takeover clause designed to make it harder for any shareholder to exceed 15% of the capital.
In the end, the board accepted the $54.20 offer. Its chair, Bret Taylor, said that after a thorough process the board believed it was the best path for shareholders. Chief executive Parag Agrawal said Twitter has a purpose and relevance that reach the whole world. The price is a 38% premium to the 1 April share price, the last trading day before Musk revealed his stake. Musk said he wants to give the product new features, publish the algorithms’ code, fight spam bots and authenticate people.
The conditions
The deal is not yet closed. It needs the approval of Twitter’s shareholders, the regulatory approvals that apply and other customary conditions, and is expected to be completed in 2022. The announcement says there is no financing condition, so closing does not depend on the buyer obtaining the money. Twitter also announced that it would publish its quarterly results on 28 April, with no call with analysts because of the pending transaction.
According to the announcement, Musk has committed financing: $25.5 billion in debt and loans secured on shares (margin loans), and about $21 billion of his own equity. A loan secured on shares is one backed by securities the borrower already owns, so its cost and risk depend on the value of those securities.
The market did not fully price in completion: the shares opened that Monday at $50.65 and reached $52.01, below the $54.20 offered, a gap that reflects uncertainty over timing, approvals and the final outcome.
What to bear in mind
For companies, it is an example of how the purchase of a listed company is structured to take it off the market: a fixed cash price, a premium over the previous share price, a shareholder vote, approvals and committed financing. Boards of directors assess offers in their shareholders’ interest, and mechanisms such as the poison pill allow time to do so.
For anyone holding shares, directly or through funds, the lesson is one of method: when a takeover offer is made, the price, the conditions and the timetable matter as much as the headline. This note is for information only and does not recommend any transaction in any security. Ask your adviser how it applies to your case.
An offer closes when its conditions are met, not when it is announced.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
