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Twitter adopts ‘poison pill’ when Musk challenger appears According to Reuters


© Reuters. Elon Musk’s twitter account is seen on a smartphone in front of the Twitter logo in this illustration photo taken, April 15, 2022. REUTERS/Dado Ruvic/Illustration

By Greg Roumeliotis and Krystal Hu

(Reuters) – Twitter Inc (NYSE:) passed a ‘poison pill’ on Friday to limit Elon Musk’s ability to increase his stake in the social media platform, as an acquisition company emerges challenging a 43 billion bid. his dollars to the company.

Thoma Bravo, a technology-focused private equity firm with more than $103 billion in assets under management at the end of December, announced to Twitter that it was exploring the possibility of a bid, the said a person familiar with the matter.

It is unclear how much Thoma Bravo will be prepared to put up and it is unlikely that such a rival bid will materialize, the sources warned, requesting anonymity because the matter is confidential.

A spokesperson for Thoma Bravo declined to comment while a Twitter representative did not immediately respond to a request for comment. The New York Post reported on Thursday that Thoma Bravo is considering an acquisition of Twitter.

On Friday, Twitter said it had approved a poison that could dilute the shares of anyone who is accumulating more than 15% of the company’s shares by selling more shares to other shareholders at a discount. discount. Known officially as a shareholder rights plan, the poison pill will be in effect for 364 days.

The move won’t stop Musk from pitching his offer directly to Twitter shareholders by launching a tender offer. While the poison pill would prevent most Twitter shareholders from selling their shares, the public offer would allow them to register for or against Musk’s offer.

“It’s a predictable defensive measure for a downward board that won’t be viewed positively by shareholders due to the potential for dilution and an unfriendly buyback move,” said analyst Dan. Wedbush’s Ives tweeted on Friday.

Thoma Bravo’s interest raises the specter of more private equity firms scrambling for Twitter. According to data provider Preqin, the global private equity industry is using about $1.8 trillion in dry powder. Unlike the big tech corporations, most acquirers will not face antitrust restrictions in their acquisition of Twitter.

It’s still possible that a private equity firm will boost Musk’s bid by partnering with him rather than challenging him. However, Musk’s criticisms of Twitter’s reliance on ads to generate most of its revenue have made some private equity firms apprehensive about partnering with him, industry sources said. . This is because strong cash flow makes it much easier to finance leveraged buybacks.

Silver Lake, a private equity firm with more than $90 billion in assets under management, would be a natural partner for Musk as it has financed his $72 billion bid for Tesla. (NASDAQ 🙂 Inc 4 years ago, then Musk gave up. Silver Lake’s co-CEO, Egon Durban, is also on Twitter’s board.

But Durban did not re-offend on Thursday when Twitter’s board of directors first met to discuss Musk’s offer, people familiar with the matter said, in a sign that Silver Lake is not seek to partner with Musk or make his own bid. far.

It’s still possible that Silver Lake will opt in as a buyer. A Silver Lake spokesman did not immediately respond to a request for comment on Friday.

THE BEST (NYSE:) AND FINAL OFFER’

Twitter has more than $6 billion in cash on its balance sheet and its annual cash flow is close to $700 million, providing comfort to banks considering whether to offer debt for a deal. or not. Still, the leveraged buyout for Twitter could be the biggest of all time, potentially requiring a number of acquirers and other large institutional investors to work together.

Musk is the richest person in the world with a net worth according to Forbes of $265 billion. However, he did draw a line on how much he was willing to pay. He informed Twitter on Wednesday that a $54.20 per share cash bid for the company was his “last and best offer” and that he would reconsider. his position as a Twitter shareholder if it is rejected. Musk owns more than 9% of Twitter, making him the largest shareholder after mutual fund giant Vanguard.

Musk tweeted on Thursday that Twitter shareholders should have a say in his offer and posted a poll on Twitter in which most users agreed with him. Twitter’s board of directors is still evaluating Musk’s offer and will only give it to the company’s shareholders to vote if they approve it. Twitter shares fell on Thursday, suggesting most investors expect the company’s board to reject Musk’s bid because of insufficient financial details.

Twitter’s board is expected to take several more days to evaluate Musk’s bid and draft its response, sources familiar with the matter said. The sources added that an outcome by the end of the week is unlikely.

Goldman Sachs Group Inc (NYSE:) advised Twitter’s board of directors on its considerations. Bloomberg News reported on Friday that the board has selected JPMorgan Chase (NYSE: Co Inc) as its second financial advisor.

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