Musk’s Twitter deal includes $1 billion termination fee – TechCrunch

Elon Musk will have to pay Twitter a $1 billion termination fee if it doesn’t complete its $44 billion acquisition of the social network, announced Monday, according to a new filing with the SEC. The filing, which details the terms of the agreement, says Twitter would have to pay the same fee under specific circumstances.

The billionaire tech executive has agreed to acquire Twitter and take the company private at $54.20 per share, valuing the company at around $43.4 billion.

Funds for the deal come from several sources, including funding from Morgan Stanley and other financial institutions which have pledged to provide $13 billion in funding, as well as $12.5 billion in margin loans to Musk, for his shares in Tesla and other companies. Musk himself is expected to provide equity financing of around $21 billion.

If Musk demands an exit from this deal for any reason, it will come at a price not so insignificant, but not unexpected for a deal of this size. In other words, if Musk’s funding fails, Twitter gets $1 billion if the deal is canceled.

According to the agreement (the parent is the company created by Musk that buys Twitter):

The Merger Agreement also provides that Twitter, on the one hand, or the parent company and the acquisition subcontractor, on the other hand, may specifically enforce obligations under the Merger Agreement, except that Twitter cannot cause Mr. Musk’s equity financing commitment to be funded in circumstances where the conditions of the obligations of the acquiring parent and subsidiary to complete the merger are met and the funding by borrowing and by margin lending is funded or available. As described above, if the conditions of the Parent Company’s and the Acquiring Subsidiary’s obligations to consummate the Merger are satisfied and the Parent Company fails to consummate the Merger as required under the Merger Agreement, including because the equity, debt and/or margin loan financing is unfunded, Parent will have to pay Twitter a termination fee of $1.0 billion.

Previous reports did not have this detail correct. They had suggested that Twitter should pay a termination fee of around 2.5%, but Musk would not have to pay a reverse termination fee. However, they set the closing timeframe to be around September to October.

The filing also notes that the agreement could be terminated if not completed by 5:00 p.m. PT on October 24, 2022. However, it includes a provision to extend the termination date for an additional six months. if necessary to respect certain fences. conditions related to antitrust law, foreign investment laws or other government actions that could impact the conclusion of the agreement during this period.

Twitter could still accept another offer, should one materialize before closing, the filing also notes — but that offer would likely have to be prepared to pay the $1 billion termination fee on the Musk deal. Twitter could also terminate the deal if shareholders vote against it.

The agreement sets out the circumstances under which Twitter may terminate the agreement as follows:

Upon termination of the merger agreement in specified limited circumstances, Twitter will be required to pay Parent a termination fee of $1.0 billion. Specifically, this termination fee is owed by Twitter to Parent because (1) Twitter is terminating the Merger Agreement to allow Twitter to enter into a definitive agreement for a Competing Acquisition Proposal that constitutes a Superior Proposal; or (2) Parent terminates the merger agreement because the board of directors recommends that Twitter shareholders vote against the adoption of the merger agreement or in favor of any competing acquisition proposal. This termination fee will also be payable by Twitter to Parent in the event that, generally, (1) a competing acquisition proposal for 50% or more of the shares or consolidated assets of Twitter has been publicly announced and has not been withdrawn, (2) the Merger Agreement is terminated because Twitter shareholders do not adopt the Merger Agreement or because Twitter materially breaches the Merger Agreement, and (3) within twelve months of such termination of the Merger Agreement, Twitter enters into a definitive agreement providing for a competing acquisition proposal for 50% or more of Twitter’s consolidated shares or assets and such acquisition is consummated.

More soon…