Elon Musk has unveiled a $ 46.5 billion financial package to fund his takeover bid on Twitter as he pushes through a deal that will be one of the largest leverage buyouts in history.
The billionaire CEO of the billionaire has accumulated $ 25.5 billion in debt – including a $ 12.5 billion margin loan against his shares in the electric vehicle maker – from a group of banks led by Morgan Stanley, his financial adviser.
Separately, he said he would provide $ 21 billion in equity for the deal, according to documents submitted to the Securities and Exchange Commission on Thursday, although he did not provide further details on where that part of the funding would come from.
The offer effectively puts Musk on the hook for $ 33.5 billion in the financial package, or more than 70 percent, although it could attract co-investors to fund a stake in the deal.
Securing funding is a crucial step for the independent entrepreneur, who made a hostile $ 43 billion offer to make Twitter private last week. The deal will turn Musk into a social media baron with the power to control what he describes as the world’s “de facto public city square.”
The San Francisco-based social media group confirmed that it had received an “updated, non-binding offer” from Musk, but did not give an official response, except to say that its board was “committed to a careful, comprehensive and deliberate review” of the offer.
However, the Twitter board has already raised its defense against Musk. Last Friday, he released a “poison pill” that would thwart a hostile takeover, making it extremely uneconomical for anyone to buy more than 15 percent of Twitter’s shares on the open market.
Musk is expected to use the financial package to launch a tender offer to all Twitter shareholders in the coming days, a move that will put pressure on the social media company’s board to negotiate with him.
Musk has lined up a dozen creditors – including Bank of America, Barclays, MUFG and Credit Suisse – to provide a debt and margin loan secured by $ 62.5 billion from his shares in Tesla. The debt package includes $ 6.5 billion in senior bank loans, $ 500 million in revolving loans and $ 6 billion in secured and unsecured bridge loans from seven of the banks.
Recommended
Twitter hired JPMorgan Chase and Goldman Sachs to advise him on the hostile offer.
Now that Musk has amassed an initial financial package, private investors will decide whether to try to participate in the financial package, either as debt holders or as shareholders.
Software buying group Toma Bravo, which has more than $ 100 billion in assets, has begun talking to Musk about his involvement in the takeover effort, according to a source familiar with the situation. The prospect of his involvement in Musk’s offer, first announced by the New York Post, will be key to the offer, which has attracted additional debt and equity funding from institutional investors, according to many well-known creditors. Toma Bravo declined to comment.
Lenders in the private credit market told the Financial Times that they expected it to be able to take on $ 10 billion in debt north and billions more in preferred equity.
Given the risk of $ 13 billion in debt used to finance the deal, many of the banks financing the offer are expected to try to sell the debt quickly to third-party investors, including private credit managers such as Apollo Global Management.
Other big lenders, such as Blackstone Credit, have been waiting for a financial package to appear before deciding whether to participate, people familiar with their thinking said.
Recommended
Adopting Twitter privately remains a controversial investment in the buyout industry, with some of the industry’s biggest players such as Blackstone, Vista Equity Partners and Brookfield Asset Management not interested in participating in a share auction, sources told the FT.
Silver Lake and Elliott Management, two major shareholders who backed Twitter CEO Paragu Agraval when he took over from co-founder Jack Dorsey in November, did not say if they had any interest in participating in Musk’s takeover bid.
Shares of Twitter were mostly equal in Thursday morning trading.
With additional reports from Sujeet Indap
Add Comment