Twitter adopts ‘poison pill’ as challenger to Musk emerges

By Greg Roumeliotis and Krystal Hu

(Reuters) – Twitter Inc adopted a ‘poison capsule’ on Friday to restrict Elon Musk’s capability to lift his stake within the social media platform, as a buyout agency emerged to problem his $43 billion bid for the corporate.

Thoma Bravo, a technology-focused personal fairness agency that had greater than $103 billion in property below administration as of the top of December, has knowledgeable Twitter that it’s exploring the potential of placing collectively a bid, folks acquainted with the matter mentioned.

It isn’t clear how a lot Thoma Bravo could be ready to supply and there’s no certainty that such a rival bid will materialize, the sources cautioned, asking to not be recognized as a result of the matter is confidential.

A Thoma Bravo spokesperson declined to remark whereas Twitter representatives didn’t instantly reply to a request for remark. The New York Put up reported on Thursday that Thoma Bravo was contemplating a bid for Twitter.

Twitter mentioned on Friday it adopted a poison capsule that will dilute anybody amassing a stake within the firm of greater than 15% by promoting extra shares to different shareholders at a reduction. Recognized formally as a shareholder rights plan, the poison capsule will probably be in place for 364 days.

The transfer wouldn’t bar Musk from taking his provide on to Twitter shareholders by launching a young provide. Whereas the poison capsule would stop most Twitter shareholders from promoting their shares, the tender provide would permit them to register their assist or disapproval of Musk’s provide.

“It’s a predictable defensive measure for the board to go down that won’t be seen positively by shareholders given the potential dilution and acquisition unfriendly transfer,” Wedbush analyst Dan Ives tweeted on Friday.

Thoma Bravo’s curiosity raises the specter of extra personal fairness corporations vying for Twitter. The worldwide personal fairness trade is sitting on about $1.8 trillion in dry powder, in response to knowledge supplier Preqin. Not like main expertise conglomerates, most buyout corporations wouldn’t face antitrust restrictions in buying Twitter.

It stays attainable {that a} personal fairness agency will enhance Musk’s bid by partnering with him reasonably than difficult him. Musk’s criticism of Twitter’s reliance on promoting for many of its income, nonetheless, has made some personal fairness corporations apprehensive about teaming up with him, trade sources mentioned. It’s because a robust money circulation makes financing a leveraged buyout a lot simpler.

Silver Lake, a personal fairness agency with greater than $90 billion in property below administration, could be a pure accomplice for Musk as a result of it provided financing for his $72-billion bid for Tesla Inc 4 years in the past, which Musk subsequently deserted. Silver Lake co-chief govt Egon Durban additionally sits on Twitter’s board.

However Durban didn’t recuse himself on Thursday when Twitter’s board met to debate Musk’s provide for the primary time, folks acquainted with the matter mentioned, in an indication that Silver Lake has not sought to group up with Musk or make a bid of its personal to this point.

It stays attainable that Silver Lake will select to change into concerned as a purchaser. A Silver Lake spokesman didn’t instantly reply to a request for touch upon Friday.

‘BEST AND FINAL OFFER’

Twitter has greater than $6 billion of money on its stability sheet and its annual money circulation is near $700 million, offering some consolation to banks contemplating whether or not ought to present debt for a deal. Nonetheless, a leveraged buyout for Twitter may very well be the largest of all time, doubtlessly requiring a number of buyout corporations and different main institutional traders to group up.

Musk is the world’s richest particular person with a web price pegged by Forbes at $265 billion. He has nonetheless drawn a line on how a lot he’s keen to pay. He knowledgeable Twitter on Wednesday that his $54.20-per-share all-cash bid for the corporate was his “greatest and last provide”, and that he would rethink his place as a Twitter shareholder if it was rejected. Musk owns greater than 9% of Twitter, making him the most important shareholder after mutual fund big Vanguard.

Musk tweeted on Thursday that Twitter’s shareholders ought to have a say on his provide and posted a ballot on Twitter by which most customers agreed with him. Twitter’s board continues to be assessing Musk’s provide and would solely put it to the corporate’s shareholders for a vote if it approves it. Twitter shares fell on Thursday, indicating that the majority traders anticipate the corporate’s board to reject Musk’s bid as insufficient and skinny on financing particulars.

Twitter’s board is predicted to take a number of extra days to evaluate Musk’s bid and draft its response, the sources acquainted with the matter mentioned. An final result over the weekend is unlikely, the sources added.

Goldman Sachs Group Inc has been advising Twitter’s board on its deliberations. Bloomberg Information reported on Friday that the board had tapped JPMorgan Chase Co Inc as a second monetary adviser.

(Reporting by Greg Roumeliotis and Krystal Hu in New YorkAdditional reporting by Arunima Kumar and Kannaki Deka in Bengaluru; enhancing by Jonathan Oatis, Franklin Paul and Nick Zieminski)