Twitter Inc. adopted a measure that would protect it from hostile takeover bids, and took steps to counter billionaire Elon Musk’s unwelcome offer to take the company private and turn it into a bastion of free speech.
The Board of Directors draws up a shareholder rights plan that can be exercised if a party acquires 15% of the shares without prior approval, and which only lasts for one year. The plan seeks to ensure that anyone who takes control of Twitter through open market accumulation pays all shareholders an appropriate control premium, according to a statement Friday.
Twitter adopted the plan to buy time, according to a person familiar with the matter. The Board of Directors wants to be able to analyze and negotiate any agreement, and can still accept it.
“The rights plan does not prevent the Board of Directors from engaging with parties or accepting an acquisition proposal if the Board of Directors believes it is in the interest of Twitter and its shareholders,” the company said.
The CEO of Tesla Inc. offered $ 54.20 per share in cash to Twitter on Thursday, valuing the social media company at $ 43 billion. Musk, who said it was his “best and final” offer, had already earned a share of more than 9% on Twitter since earlier this year. Twitter’s board met Thursday to review Musk’s proposal to determine if it was in the interest of the company and all of its shareholders.
A poison pill defense strategy gives existing shareholders the right to purchase additional shares at a discount, effectively diluting the enemy party’s stake. Poison pills are common among companies under fire from activist investors or in hostile takeover situations.
According to Twitter’s plan, each right will entitle its holder to, at the then applicable exercise price, purchase additional shares in ordinary shares with a then applicable market value at twice the exercise price of the right.
Included in Musk’s securities filing, which revealed the bid Thursday morning, was a text manuscript he sent to the company. In it he said, “it’s a high price and your shareholders will love it.”
However, at least one prominent investor said the offer was too low and the market reaction seemed to agree. Saudi Arabia’s Prince Alwaleed bin Talal said the deal did not “come close to the intrinsic value” of the popular social media platform.
Later Thursday, Musk told a TED conference that he was not sure he “will actually be able to acquire it.” He added that his intention was also to retain “as many shareholders as is permitted by law,” instead of retaining sole ownership of the company.
Twitter shares fell 1.7% in New York on Thursday, reflecting the market’s perception that the deal is likely to be rejected or fall through. The Wall Street Journal previously reported that the San Francisco-based company was considering a poison pill defense.
Musk first unveiled his Twitter share on April 4, making him the largest individual investor. At the TED conference, he indicated that he has a Plan B if Twitter’s board rejects his offer. He refused to elaborate. But in his application earlier in the day, he said he would reconsider his investment if the bid failed.
“If the deal does not work, given that I do not trust the management nor do I believe I can drive the necessary change in the public market, I need to reconsider my position as a shareholder,” Musk said.
–With the assistance of Jillian Ward.
(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)