Twitter adopts ‘poison pill’ as challenger to Musk emerges By Reuters

By Greg Roumeliotis and Krystal Hu

(Reuters) – Twitter Inc (NYSE:) adopted a ‘poison capsule’ on Friday to restrict Elon Musk’s means 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 non-public fairness agency that had greater than $103 billion in property beneath administration as of the top of December, has knowledgeable Twitter that it’s exploring the potential for placing collectively a bid, folks accustomed to the matter stated.

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 stated on Friday it adopted a poison capsule that might 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 likely be in place for 364 days.

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

“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 non-public fairness companies vying for Twitter. The worldwide non-public fairness trade is sitting on about $1.8 trillion in dry powder, in accordance with information supplier Preqin. In contrast to main expertise conglomerates, most buyout companies wouldn’t face antitrust restrictions in buying Twitter.

It stays potential {that a} non-public fairness agency will enhance Musk’s bid by partnering with him quite than difficult him. Musk’s criticism of Twitter’s reliance on promoting for many of its income, nevertheless, has made some non-public fairness companies apprehensive about teaming up with him, trade sources stated. It’s because a powerful money move makes financing a leveraged buyout a lot simpler.

Silver Lake, a personal fairness agency with greater than $90 billion in property beneath administration, could be a pure associate for Musk as a result of it provided financing for his $72-billion bid for Tesla (NASDAQ:) 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 supply for the primary time, folks accustomed to the matter stated, in an indication that Silver Lake has not sought to crew up with Musk or make a bid of its personal so far.

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

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Twitter has greater than $6 billion of money on its stability sheet and its annual money move 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 could possibly be the most important of all time, probably requiring a number of buyout companies and different main institutional buyers to crew up.

Musk is the world’s richest particular person with a web price pegged by Forbes at $265 billion. He has nevertheless drawn a line on how a lot he’s prepared to pay. He knowledgeable Twitter on Wednesday that his $54.20-per-share all-cash bid for the corporate was his “greatest and remaining supply”, 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 biggest shareholder after mutual fund large Vanguard.

Musk tweeted on Thursday that Twitter’s shareholders ought to have a say on his supply and posted a ballot on Twitter during which most customers agreed with him. Twitter’s board remains to be assessing Musk’s supply 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 buyers 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 accustomed to the matter stated. An consequence over the weekend is unlikely, the sources added.

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