People familiar with the matter said that the Twitter board began negotiations with Elon Musk after his USD43 billion acquisition offer for Twitter.
Sources said that the board’s decision to enter into talks with Musk was not a reflection of its acceptance of Musk’s per share bid of USD 54.20. It did, however, signify that the company was exploring whether a sale to Musk was possible on more attractive terms to the company.
Musk has previously said that the company needs to be taken private and made into a legitimate platform for free speech. In the last few days, he has been meeting with shareholders in an effort to seek support for his takeover bid.
After Elon Musk provided a detailed financing plan for the takeover, shareholders of Twitter urged the board to enter negotiations with him.
Twitter board considers offer
Although Musk had said that the USD43 billion offer was his best and final bid, the Twitter board decided to gather more information from Musk and engage with him to explore potentially better terms for the deal.
The board of directors was keen to know about any active investigations into Musk by regulators that could potentially pose a risk to the deal.
Some lawyers were of the opinion that Musk may have flouted SEC disclosure rules when he amassed a 9.2 percent stake in Twitter earlier this year.
The Twitter board was also checking if regulators in any major markets would object to the takeover bid by Musk. Sources said that if Twitter establishes that a sale to Musk would be risky, it may ask for a substantial break-up fee.
Recently, the company adopted a poison pill approach to prevent Musk from owning more than 15 percent of the company. This method would allow shareholders to purchase shares at a lower price in order to dilute Musk’s stake in the company. In response, Musk had threatened that he would launch a tender offer that would register shareholder support for the takeover bid.
A major reason for Twitter to engage in talks with Musk was that if it didn’t, shareholders might side with Musk in a tender offer. The company was said to be worried that it would be shown to be going against the will and interest of shareholders in the company.
Since it aims to bypass the company’s board, Musk’s offer has been seen as a hostile takeover bid. Twitter’s poison pill defence has been seen as an effort to prevent Musk from owning more than 15 percent of the company.
Bowing down to increasing shareholder pressure to engage in talks with Musk, the board of Twitter met on Sunday to discuss the terms of the offer. While board members are expected to find the offer too low, after the company reports quarterly earnings on Thursday, many shareholders are putting the board under pressure to seek a better offer from Musk. Some have even urged the board to seek offers from rivals.