Twitter has launched a poison pill takeover defense to fend off a hostile $43 billion bid from Tesla billionaire Elon Musk.
In the first indication that the social media company plans to fight Musk’s offer, Twitter said Friday that its board of directors unanimously approved a year-long shareholder rights plan to “allow all shareholders to realize the full value of their investment in Twitter.” “. .
The board’s aggressive move, aimed at preventing Musk from building a more than 15 percent stake in the open market, will likely end the South African-born entrepreneur’s hopes of buying the social media company.
It comes as US private equity group Thoma Bravo has also expressed interest in taking Twitter private in a competing bid on Musk, although sources said it was at a very early stage and no offer had been made.
Both Thoma Bravo and Twitter declined to comment.
Musk said this week that his offer was “the best and final,” adding that “if it’s not accepted, I would have to reconsider my position as a shareholder.” A person close to Musk said he would not step down from that position.
Under Twitter’s plan, existing shareholders can buy shares at a discount if someone acquires more than 15 percent without board approval, diluting an unwelcome bidder.
Musk offered Twitter $54.20 per share in cash, valuing the company at $43.4 billion days after taking a 9% stake in the company to become one of its largest shareholders.
Twitter’s board of directors fears that if Musk were to build a stake worth more than 15 percent, he could indirectly wield significant power over the direction of the company, even without a managerial or board role.
The only way for him to take over Twitter now is through an amicable deal, which would have to involve a significantly higher price, said a person close to the company’s board of directors.
Poison pills were developed in the 1980s as a defensive strategy to protect companies from attackers and have been widely criticized as a way for a company’s managers to fortify themselves against attack. Subsequent legal challenges reduced some of their effectiveness, and most academic studies have shown that while poison pills delay an unwanted takeover bid, they typically do not prevent an eventual post-negotiation settlement.
Twitter said the plan could reduce the likelihood of a hostile bidder “gaining control of Twitter through accumulation in the open market without paying all shareholders a reasonable control premium,” as well as slow any bid.
“The Rights Plan does not prevent the board from engaging with parties or considering an acquisition proposal when the board believes doing so is in the best interests of Twitter and its shareholders,” he added. The plan expires on April 23, 2023, it said.
After announcing his involvement last week, Musk reached a tentative agreement with the company to join its board, only to reverse course on Monday without explanation.
Musk announced his offer Thursday in a regulatory filing, saying it would unlock the company’s potential to be “the platform for free speech around the world.” Included in the filing was a transcript of a message he sent to Twitter that read, “It’s a big price and your shareholders will love it.”
The offer represents a 38 percent premium over Twitter’s share price since April 1, three days before its stake went public, although it’s still 26 percent below its 12-month high.
It’s unclear exactly how Musk would fund the deal. In an interview after the announcement, Musk said he had “enough assets” to do it and wanted to keep as many shareholders as possible. However, he admitted, “I’m not sure I can actually afford it.”
Musk didn’t publicly address the poison pill counterattack on Friday, but took to Twitter to thank his fans for their “support” after they voted to buy the company in an online poll conducted by a Bitcoin newsletter.
Additional reporting by Antoine Gara in New York