Elon Musk unveils $46bn bid for Twitter
Elon Musk has secured commitments for $46.5bn (£35.5bn) that would allow him to bypass Twitter’s (TWTR) board and go directly to the social media company’s shareholders with his takeover bid.
Musk said he would personally provide $21bn of equity for the deal with another $12.5bn coming from margin loans, according to paperwork filed with the Securities and Exchange Commission on Thursday.
Read more: Elon Musk's $43bn Twitter bid: What is a poison pill defence?
Banks, including Morgan Stanley, have agreed to provide another $13bn in debt secured against Twitter itself, according to the filing.
Musk has not yet determined if he will make a tender offer for Twitter or whether he will take other steps to further the proposal, the filing states.
Tender offers involve making a bid to purchase some or all shares of a company directly from its shareholders.
Musk had earlier offered to buy the social media platform for $43bn and Twitter's board is yet to officially respond to that offer but adopted a so-called a "poison pill" strategy.
The poison pill is another term for a shareholder rights plan, which allows investors to buy additional shares of the company’s stock at a discount.
This dilutes the value of each individual share amid concerns about an unwanted hostile takeover.
In Twitter’s case, if any shareholder accumulates a 15% stake in the company in a purchase not approved by the board of directors, other shareholders would get the right to buy additional shares at a discount, diluting the 9.2% stake Musk recently acquired.
Watch: Why Elon Musk isn't a typical activist investor with his Twitter holdings
If set into motion, the poison pill will give shareholders more voting power while severely diluting Musk’s shares in the firm.
In a previous statement, Twitter said it would “carefully review” the offer. "Twitter's board will evaluate an "unsolicited, non-binding" offer from Tesla chief Elon Musk to acquire the social media company, the social media company said.
"The Twitter board of directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the company and all Twitter stockholders," Twitter said as it confirmed it received Musk's bid valuing the company at $43.4 billion.
Musk's offer price of $54.20 per share represents a 38% premium to the closing price of Twitter's stock on 1 April, the last trading day before the Tesla CEO's over 9% investment in the company was publicly announced.
Here is how Musk intends to pay for Twitter
The first tranche comes from Morgan Stanley and other financial institutions that have “committed to provide $13bn in financing to Musk in the form of a $6.5bn senior secured term loan facility, a $500m senior secured revolving facility, a $3bn senior secured bridge loan facility, and a $3bnnsenior unsecured bridge loan facility”.
The other participating firms include Bank of America, Barclays, MUFG, Société Générale, Mizuho Bank and BNP Paribas.
Read more: Twitter shares soar as Elon Musk takes $2.9bn stake
The second tranche comes from Morgan Stanley and others who have committed to provide $12.5bn in margin loans to Musk against his Tesla (TSLA) shares.
Finally there is an “equity commitment letter” from Musk to “provide equity financing for the Proposed Transaction or the Potential Offer sufficient to pay all amounts payable in connection with the Offer and the Merger” net of the above funding sources. The total value of this equity commitment from Musk is “expected to be approximately $21bn,” the filing states.
Musk is the largest shareholder in the company, with more than four times the 2.25% shareholding of Twitter co-founder Jack Dorsey.
The Tesla boss is an avid user of Twitter, having used the social media platform to make announcements about his company and a variety of issues to his more than 80 million followers.
After criticism to his takeover he tweeted: “Board salary will be $0 if my bid succeeds, so that’s ~$3M/year saved right there."
Twitter has hired JPMorgan Chase and Goldman Sachs as its advisers.
Watch: Tesla CEO Elon Musk teases Twitter tender offer in amended filing