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Twitter And Musk Now In “Advanced” Deal Talks As Board Reconsiders Bid

Courtesy of ZeroHedge View original post here.

Update (0530ET): After a long night of talks between the Twitter board and Musk and his team, it looks like the odds of a deal have improved somewhat – although we only have the imprecise language of financial journalists to guide us on the current status.

After news broke yesterday afternoon that Twitter had become “more receptive” to Musk’s offer, a long night of presumably intense talks has ensued, and according to the latest leaked news from inside the boardroom, their talks have reached an “advanced” stage, according to a report published by the NYT earlier this morning.

To be sure, nothing is set in stone, but it appears the board is seriously considering Musk’s offer, and may yet agree to a deal, provided no higher bids emerge.

Here’s more from the NYT:

Twitter is nearing a deal to sell itself to Elon Musk, two people with knowledge of the situation said, a move that would unite the world’s richest man with the influential social networking service.

Twitter’s board was negotiating with Mr. Musk into the early hours of Monday over his unsolicited bid to buy the company, after he began lining up $46.5 billion in financing for the offer last week, said the people, who spoke on the condition of anonymity because they were not authorized to discuss confidential information. The two sides were discussing details including a timeline to close any potential deal and any fees that would be paid if an agreement were signed and then fell apart, they said.

The discussions followed a Twitter board meeting on Sunday morning to discuss Mr. Musk’s offer, the people said. Obtaining commitments for the financing was a turning point for how the board viewed Mr. Musk’s bid of $54.20 a share, enabling the company’s 11 board members to seriously consider his offer, the people said.

While the NYT caveats its report with the standard ‘nothing here is final’, they noted that the “highly improbable” deal (improbable according to who, as would ask?) has now become…well…much less “improbable”.

An agreement is not yet final and may still apart, but what had initially seemed to be a highly improbable deal appeared to be nearing an endgame. The situation involving Twitter and Mr. Musk remains fluid and fast-moving, the people with knowledge of the situation said.

Unsurprisingly, the Twitter mob is already out in force, decrying the Twitter board’s apostasy and the havoc it might unleash.

To be fair, we think this last one might be trolling.

It’s unclear what may have precipitated the Twitter board’s sudden change of heart (despite the obvious financial incentives given Twitter stock’s current market price and its reaction to the deal news) we have repeatedly pointed out that the board and the company would only stand to benefit by seriously considering Musk’s offer and inviting any and all parties with a potentially better offer to come forward (although those who are opposed to a Musk buyout have repeatedly pointed out that the company’s shares traded above his offer price for much of last year).

But if Musk and his backers do end up with control of the company and things don’t work out: maybe he can engineer a “merger” with Tesla like he did for SolarCity?

* * *

Elon Musk’ twitter takeover, which just one week ago seemed increasingly unlikely after the company rushed to adopt a poison pill, is suddenly looks rather possible and not because the world’s richest man decided to go all scorched over Twitter’s bread and butter, namely censorship and shadowbanning…

shadow ban council reviewing tweet …

— Elon Musk (@elonmusk) April 23, 2022

… but because the WSJ reports that the social media company’s board is ” more receptive to a deal” and is re-examining Musk’s $43 billion takeover offer after the billionaire lined up financing for the bid.

While Twitter had been expected to rebuff the offer, which Musk made earlier this month without saying how he would pay for it, and prompting Musk to threaten to launch a tender offer. But after Musk disclosed last week that he now has $46.5 billion in financing thanks to Morgan Stanley, “Twitter is taking a fresh look at the offer and is more likely than before to seek to negotiate” although the situation is fast-moving and it is still far from guaranteed Twitter will do so.

To be sure, a deal is certainly not assured yet as Twitter is still working on an all-important estimate of its own value, which would need to come in close to Musk’s offer (of course, it will be aggressive for the twitter board to claim there is much more value in a company which has rarely traded at or above the Musk offer price since it went public), and it could also insist on sweeteners such as Musk agreeing to cover breakup protections should the deal fall apart, some of the people said.

Twitter is expected to provide its views on the bid when it reports first-quarter earnings Thursday, if not sooner. As we suggested last week, the company’ response won’t necessarily be black-and-white, and could leave the door open for inviting other bidders, i.e., a “go shop period” or negotiating with Musk on terms other than price.

While Musk has reiterated to Twitter’s chairman Bret Taylor in that he won’t budge from his offer of $54.20-a-share, the deal will hardly fall apart over several dollars; as such expect a deal to happen somewhere in the high $50s, low $60s.

The two sides are meeting Sunday to discuss Musk’s proposal.

According to WSJ sources, the potential turnabout on Twitter’s part comes after Musk met privately Friday with several shareholders of the company to extol the virtues of his proposal while repeating that the board has a “yes-or-no” decision to make. He also pledged to solve the free-speech issues he sees as plaguing the platform and the country more broadly, whether his bid succeeds or not, WSJ sources said.

The Tesla Inc. chief executive made his pitch to select shareholders in a series of video calls, with a focus on actively managed funds, the people said, in hopes that they could sway the company’s decision.

Mr. Musk said he sees no way Twitter management can get the stock to his offer price on its own, given the issues in the business and a persistent inability to correct them. It couldn’t be learned if he detailed specific steps he would take, though he has tweeted about wanting to reduce the platform’s reliance on advertising, as well as to make simpler changes such as allowing longer tweets.

To the shock of woke liberals everywhere who would enter a period of mourning should Musk become the news boss, the billionaire already has some shareholders rallying behind him following the meetings. Lauri Brunner, who manages Thrivent Asset Management LLC’s large-cap growth fund, sees Musk as a skilled operator. “He has an established track record at Tesla,” she said. “He is the catalyst to deliver strong operating performance at Twitter.” Minneapolis-based Thrivent has a roughly 0.4% stake in Twitter worth $160 million and is also a Tesla shareholder.

Picking up on a point we made last week, Jeff Gramm, a portfolio manager with Bandera Partners LLC, a New York hedge fund with about $385 million under management, said that Twitter’s board should engage with Mr. Musk since its stock has “gone nowhere” since the company went public eight years ago.

The firm last bought Twitter shares in February and owns about 950,000 overall, which accounts for about 11% of its portfolio.

Gramm said Twitter’s board can’t walk away from Mr. Musk’s offer without providing an alternative that gives real value to shareholders. “I’m not sure what can be at this stage besides finding a higher bid,” he said, which of course is true, but the probability that someone will offer more than Musk is very much, to loosely paraphrase Musk, “unsecured.”

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