There’s a $1bn fee if either Twitter or Musk back out of dealVish Gainon April 27, 2022 at 08:18 Silicon RepublicSilicon Republic

0

Elon Musk’s takeover deal with Twitter includes a clause whereby if either party ends up terminating the agreement, they might have to pay the other a $1bn fee, according to official filings published yesterday (26 April).

Twitter will have to pay the termination fee – roughly 2.5pc of the entire deal – if, for instance, it decides to take a better offer from someone else. Musk, on the other hand, would have to pay the fee if he fails to provide financing for the $44bn deal he struck with Twitter on Monday.

The filing also states that if the deal isn’t closed by 24 October, both sides could walk away without a takeover. However, if the deal isn’t closed because it is awaiting regulatory approval at the time, a six-month extension would apply.

Background

This follows nearly a month of back-and-forth between the world’s richest man and the social media giant, after Musk bought a significant stake in Twitter to become one of its biggest shareholders in March.

It was then announced that Musk would be joining Twitter’s board of directors, with plans to bring “significant improvements” with him – such as an edit button. The next day, Twitter confirmed it was working on one.

Days later, the plan to have him on the Twitter board fell through, which is when he offered to take full control of the social media company with a “best and final” offer to take it off the stock market and implement his vision without accountability to shareholders.

And this week, on Monday, the two sides reached the $44bn deal after A filing with the US Securities and Exchange Commission (SEC) published on 21 April showed that Musk had been exploring a tender offer to acquire the company.

The documents showed that Musk had received commitments for funds to make the deal, including $25.5bn in debt financing from Morgan Stanley and other firms, and around $21bn in equity financing.

Headwinds from Europe

While the deal is still awaiting regulatory approval in the US, it is unlikely to be stopped because it does not represent anti-competitive behaviour where a rival social media company acquires another.

However, Musk might yet find some headwinds from the EU in the form the landmark Digital Services Act agreed over the weekend, which demands tech companies take control of content moderation.

“Be it cars or social media, any company operating in Europe needs to comply with our rules – regardless of their shareholding. Mr Musk knows this well,” tweeted Thierry Breton, the EU’s internal market chief. “He is familiar with European rules on automotive and will quickly adapt to the Digital Services Act.”

10 things you need to know direct to your inbox every weekday. Sign up for the Daily Brief, Silicon Republic’s digest of essential sci-tech news.

The post There’s a $1bn fee if either Twitter or Musk back out of deal appeared first on Silicon Republic.

Leave a Comment