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As A Rival To Musk Arises, Twitter Embraces The Proverbial "Poison Pill"

As A Rival To Musk Arises, Twitter Embraces The Proverbial "Poison Pill"
As a buyout group emerged to contest Elon Musk's $43 billion bid for Twitter, the company implemented a "poison pill" on Friday to limit Musk's potential to increase his share in the social media site.
According to persons familiar with the situation, Thoma Bravo, a technology-focused private equity firm with more than $103 billion in assets under management as of the end of December, has told Twitter that it is considering putting together a proposal. find out more
It's unclear how much Thoma Bravo might be willing to offer, and there's no guarantee that such a rival bid will materialise, according to the individuals, who declined to be identified since the topic is private.
A spokesperson for Thoma Bravo declined to comment, and officials for Twitter did not immediately respond to a request for comment. According to the New York Post, Thoma Bravo is exploring a bid for Twitter.
Twitter announced on Friday that it had implemented a poison pill that will dilute anyone with a stake in the company of more than 15% by selling more shares at a discount to other owners. The poison pill, properly known as a shareholder rights plan, will be in effect for 364 days.
The measure would not prevent Musk from immediately approaching Twitter shareholders with his offer via a tender offer.
While the poison pill would make it impossible for most Twitter shareholders to sell their shares, the tender offer would allow them to express their support or opposition to Musk's offer.
"It is a predictable defensive measure for the board to go down that will not be viewed positively by shareholders given the potential dilution and acquisition unfriendly move," Wedbush analyst Dan Ives tweeted on Friday.
The fact that Thoma Bravo is interested suggests that there will be more private equity groups fighting for Twitter. According to data source Preqin, the global private equity business has $1.8 trillion in dry powder. Most buyout firms, unlike huge technological conglomerates, would not face antitrust limitations if they bought Twitter.
Musk's bid might be boosted by a private equity group cooperating with him rather than competing with him. According to industry sources, Musk's criticism of Twitter's reliance on advertising for the majority of its revenue has made some private equity firms wary of partnering with him. This is because a robust cash flow makes it much easier to finance a leveraged buyout.
Silver Lake, a private equity firm with over $90 billion in assets under management, would be an ideal partner for Musk because it financed his $72-billion bid for Tesla Inc (TSLA.O) four years ago, which Musk later abandoned. Egon Durban, the co-chief executive of Silver Lake, is also a member of Twitter's board of directors.
However, when Twitter's board convened on Thursday to debate Musk's offer for the first time, Durban did not recuse himself, according to people familiar with the subject, indicating that Silver Lake has not sought to link up with Musk or make its own bid thus far.
It's still feasible that Silver Lake will decide to participate as a buyer.
There were no comments on the issue form a Silver Lake spokesman.
Twitter has more than $6 billion in cash on its balance sheet and generates close to $700 million in annual cash flow, giving banks some peace of mind when deciding whether or not to issue finance for a purchase. Nonetheless, a leveraged buyout for Twitter might be the largest company all time, requiring the collaboration of numerous buyout companies and other important institutional investors.
Musk is the richest person on the planet, according to Forbes, with a net worth of $265 billion. He has, however, set a limit on how much he will pay.
On Wednesday, he notified Twitter that his $54.20-per-share all-cash proposal for the firm was his "best and final offer," and that if it was rejected, he would reevaluate his status as a Twitter shareholder. Musk owns more than 9% of Twitter, making him the second-largest stakeholder after Vanguard, the mutual fund giant.
On Thursday, Musk announced that Twitter's shareholders should vote on his offer, and he posted a poll on Twitter in which the majority of users agreed with him. The board of directors of Twitter is still considering Musk's offer and will only bring it to a vote of the company's shareholders if it is approved. Twitter's stock dropped on Thursday, signalling that most investors believe the company's board of directors will reject Musk's approach as insufficient and lacking in financial information.
According to sources familiar with the situation, Twitter's board will need several more days to evaluate Musk's bid and compose its response. According to the sources, a decision by the weekend is doubtful.
The board of directors of Twitter has been advised by Goldman Sachs Group Inc. According to Bloomberg News, the board has hired JPMorgan Chase Co Inc as a second financial adviser.

Christopher J. Mitchell

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