Twitter, Elon Musk’s in talks over $59.41bn takeover bid

It is understood the two sides have met to discuss the takeover proposal, and could finalise a deal as soon as this week.

Twitter is re-examining Elon Musk’s $US43bn takeover offer after the billionaire lined up financing for the bid. Picture: Ryan Lash/AFP

Twitter is in discussions to sell itself to Elon Musk and could finalise a deal as soon as this week, people familiar with the matter have said, a dramatic turn of events just 10 days after the billionaire unveiled his $US43bn ($A59.41bn) bid for the social-media company.

The two sides met on Sunday (US time) to discuss Mr. Musk’s proposal and were making progress, though still had issues to hash out, the people said. There are no guarantee they will reach a deal.

Twitter had been expected to rebuff the offer, which Mr Musk made earlier this month without saying how he would pay for it. But after he disclosed last week that he now has $US46.5bn in financing, Twitter is taking a fresh look at the offer and is more likely than before to seek to negotiate, people familiar with the matter said. The situation is fast-moving and it is still far from guaranteed Twitter will do so.

Twitter is still working on an all-important estimate of its own value, which would need to come in close to Mr Musk’s offer, and it could also insist on sweeteners such as Mr Musk agreeing to cover break-up protections should the deal fall apart, some of the people said.

The two sides are meeting Sunday to discuss Mr Musk’s proposal, the people said.

Twitter is expected to weigh in on the bid when it reports first-quarter earnings Thursday, if not sooner, the people said. Twitter’s response won’t necessarily be black-and-white, and could leave the door open for inviting other bidders or negotiating with Mr Musk on terms other than price. Mr Musk reiterated to Twitter’s chairman Bret Taylor in recent days that he won’t budge from his offer of $US54.20-a-share, the people said.

The potential turnabout on Twitter’s part comes after Mr 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, according to people familiar with the matter. 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, they said.

The Tesla 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.

Mr Musk already has some shareholders rallying behind him following the meetings. Lauri Brunner, who manages Thrivent Asset Management’s large-cap growth fund, sees Mr 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 per cent stake in Twitter worth $US160m and is also a Tesla shareholder.

Mr Musk already has said he is considering taking his bid directly to shareholders by launching a tender offer. Even if he was to get significant shareholder support in a tender offer — which is far from guaranteed — he would still need a way around the company’s poison pill, a legal manoeuvre it employed that effectively blocks him from building his stake to 15 per cent or more.

One oft-employed tactic to push a bid, seeking to gain control of the target’s board, is out of reach for now. Twitter’s directors have staggered terms, meaning a dissident shareholder would need multiple years to gain control rather than a single shareholder vote.

Twitter tried last year to phase out the staggered board terms given that they are frowned upon by the corporate-governance community, but not enough shareholders voted on the measure. The company is attempting to do so again at this year’s annual meeting set for May 25. Only two directors are up for re-election, and it is too late for Mr Musk to nominate his own.

Twitter’s shares have been trading below his offer price since he made the bid April 14, typically a sign that shareholders are sceptical a deal will happen, though they did close up roughly 4 per cent Friday at $US48.93, the day after he unveiled financing for the deal. He has indicated that if the current bid fails, he could sell his stake, of more than 9 per cent.

The financing included more than $US25bn in debt coming from nearly every global blue-chip investment bank aside from the two advising Twitter. The remainder was $US21bn in equity Mr Musk would provide himself, likely by selling existing stakes in his other businesses such as Tesla. The speed at which the financing came together and the market sell-off in recent days — which makes the all-cash offer look relatively more attractive — likely contributed to Twitter’s greater willingness to entertain Mr Musk’s proposal.

Twitter’s board should engage with Mr Musk since its stock has “gone nowhere” since the company went public eight years ago, said Jeff Gramm, a portfolio manager with Bandera Partners, a New York hedge fund with about $US385m under management. The firm last bought Twitter shares in February and owns about 950,000 overall, which accounts for about 11 per cent of its portfolio.

Mr 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 that can be at this stage besides finding a higher bid,” he said.

—Sarah E. Needleman contributed to this article.