San Francisco (Times Of Ocean)- Elon Musk has secured funding commitments of $46.5 billion to buy Twitter Inc. and plans to begin a tender offer for its shares, a filing with the Securities and Exchange Commission showed on Thursday.
Musk announced last week that he would buy Twitter for $54.20 per share, or $43 billion. He did not explain how he would finance the acquisition at the time.
Tesla CEO Elon Musk said Thursday in documents filed with a U.S. securities regulator that he is exploring the possibility of making a tender offer to buy all of the social media platform’s stock at $54.20 per share in cash. As part of a tender offer, Musk, who owns about 9% of Twitter, would take his offer directly to other shareholders, bypassing the board.
Musk has not yet decided whether to make that offer.
Musk’s proposal has yet to be responded to, according to documents filed with the Securities and Exchange Commission.
In a statement, Twitter said it had received Musk’s updated proposal and “new information on potential financing.”
Twitter’s board will determine the best course of action for the company and its stockholders as part of its commitment to conducting a thoughtful and comprehensive review.”
Last week, Twitter’s board of directors adopted a “poison pill” defense that may make a takeover attempt prohibitively expensive.
Morgan Stanley the Primary Financer
According to the filing, “entities related to Musk have committed to provide approximately $46.5 billion in commitment letters.”
Morgan Stanley and other financial institutions would provide the financing. Other banks involved include Barclays, Bank of America, Societie Generale, Mizuho Bank, BNP Morgan Stanley and the other banks provided $13 billion in financing, and Musk committed $21 billion in equity from him, although the source of those funds was not specified. The filing indicates the equity commitment could be reduced by contributions from others or by additional debt.
Musk is reportedly the world’s wealthiest man, with a fortune of $279 billion. Yet much of his wealth is tied up in Tesla stock – he owns 17% of the company, according to FactSet, which is worth more than $1 trillion – and SpaceX, his privately held space company. It’s unclear how much cash Musk has left.
Elon Musk owns 172.6 million shares valued at $176.47 billion. Just over 51% of his stake has already been pledged as collateral, according to a Tesla proxy statement. That means Musk could borrow about $21.5 billion if the remaining stake is pledged as collateral.
Investment Banking Credibility
According to Wedbush Securities analyst Daniel Ives, getting financing from big banks lends credibility to Musk’s bid.
“This isn’t just Musk antics,” Ives said. “Banks were going to line up for this deal from the richest person in the world. The fact they they pulled it together this quick shows that Musk isn’t joking around. This is a real bid.”
The tender offer puts more pressure on Twitter’s board to find a second bidder or negotiate with Musk. “It’s a way to circumvent the poison pill and let shareholders speak,” Ives said.
According to a financing commitment letter filed by X Holdings 1, Musk and some affiliates formed the Delaware corporation with the aim of acquiring, directly or indirectly, all shares of Twitter or merging with that company.
Twitter shares rose to $46.86 in midday trading on Thursday after the news of the financing became public. The price is $7.34 lower than Musk’s offer.
Musk “is seeking to negotiate a definitive agreement for the acquisition of Twitter … and is prepared to begin such negotiations immediately,” the documents say.
Musk would use a tender offer to get shareholders to pledge their stock to him at a certain price on a certain date. If enough shareholders agreed, Musk could use that leverage to get the board to drop the poison pill defense.
This week, Musk used the word “tender” several times in tweets.