Banks agree to fund $44 billion acquisition of Twitter Inc by Elon Musk financially motivated to help the world’s richest person
Banks agree to fund Elon Musk’s $44 billion acquisition Twitter Inc has a financial incentive to help the world’s richest man leave, but will face lingering legal difficulties, according to the report. Everyone close to deals and corporate law professionals.
Twitter sued Musk to force him to complete the transaction, dismissing his claims that the San Francisco-based company misled him about the amount Spam account on it social media background as buyer’s remorse amid a plunge in tech stocks.
The Delaware Premier Court, where the dispute between the two parties is being litigated, has set a high standard for buyers being allowed to forgo their transactions and most legal experts say the arguments in a lawsuit in favor of Twitter.
However, there one Scenario in which Musk would be allowed to walk away from the acquisition by paying only Twitter a $1 billion breakup fee, according to the terms of their contract. His $13 billion bank financing for the deal would have to fall apart.
The refusal to finance this deal will affect the reputation of banks in the merger and acquisition market as a reliable source of debt. However, the banks will have at least two reasons to help Musk exit the acquisition, three sources familiar with the deal said.
They also face the prospect of hundreds of millions of dollars in losses if Musk is forced to close the deal, the sources said. This is because, like every major acquisition, banks will have to sell debt to recover the debt.
Sources say they will struggle to attract investors amid a downturn in the debt market since the deal was signed in April and the fact that Musk will be seen as a public buyer. company is not in good faith, sources said. At that time, banks will have to face the prospect of selling debt at a loss.
It is unclear whether the banks have agreed to finance the acquisition – Morgan StanleyBank of America Corp, Barclays Plc, Mitsubishi UFJ Financial Group Inc, BNP Paribas SA, Mizuho Financial Group Inc and Societe Generale SA – will attempt to exit the deal.
The banks are awaiting the outcome of the legal dispute between Musk and Twitter before making any decisions, according to the sources. The trial is scheduled to begin in October.
Spokespersons for Morgan Stanley, Bank of America, Barclays, Mitsubishi and Mizuho declined to comment, while BNP Paribas and Societe Generale did not immediately respond to requests for comment.
There’s a benefit to banks acting as Musk’s exit doors. He will have to show in court that the banks have refused to fulfill their debt commitments despite his best efforts, according to the terms of his Twitter contact agreement.
It will be a challenge to prove Musk’s public claims against the deal as well as private communications between Musk and the banks that Twitter may disclose in the request, the four attorneys said. and company professors interviewed by Reuters said.
Professor Eric Talley of Columbia Law School said: “Musk will have to convince the judge that he is not responsible for the failed bank funding.
Musk and Twitter representatives did not respond to requests for comment.
Even if the banks could show they weren’t acting on Musk’s orders, it would be hard for them to get out of the Twitter deal, legal experts said. They point to the case of chemical maker Hunstman Corp, which in 2008 sued banks for failing to finance a $6.50 sale to Hexion Specialty Chemicals.
Hexion, owned by private equity firm Apollo Global Management Inc, dropped the deal after Huntsman’s situation deteriorated, but a Delaware judge ruled that the transaction should go ahead. The two banks that financed the deal, Credit Suisse Group AG and Deutsche Bank AG, later refused to finance, arguing that the combined company would be insolvent.
Huntsman sued the banks, and a week after the trial, they settled. Banks have agreed to cash payments of $620 million pay and the provision of a $1.1 billion line of credit to Hunstman, which also secured an earlier $1 billion payment from Apollo.
Banks considering funding Musk’s deal will also have to prove that Twitter will default if the acquisition happens or that the terms of their debt pledge are somehow breached, a level based on agreement documents that have been made public, legal experts say.
“If the banks try to get out of the deal, they will enter the same battle as Musk has entered, where Twitter has arguments,” said Eleazer Klein, co-chair of the law firm Schulte Roth & Zabel LLP. better legislation”. , buyback and group of securities.