Even Among Corporate Raiders, Elon Musk Is a Pirate

The history of mergers and acquisitions is full of ruthless corporate thugs, wars of words and people trying to harden each other.

T. Boone Pickens, the oil tycoon who made a splash in the 1980s, took small stakes in energy companies, attacked management and forced companies to sell. Activist investor Carl Eckah amassed shares of the companies and threatened to fire his board if they did not agree to the deal. And Robert Campio, a Canadian real estate investor known for his engineering buyouts, was not afraid to take legal action against companies trying to manipulate his advances.

Even with all those cutthroat tricks, the bargaining world has never seen a buyer like Elon Musk.

During the week Mr. Musk, the world’s richest man, signed a 44 billion deal to buy the social media service Twitter, improving the deal’s landscape. Usually, when the two parties agree to negotiate an acquisition, they spend weeks extracting financial matters and details. The proceedings take place mostly behind closed doors, inside the boardroom and in reputable legal entities and investment banks.

But Mr. According to the legal filing, Musk forgave the due diligence to complete the Twitter deal. Since then, he has publicly criticized Twitter’s service – on Twitter, naturally – attacking some of its top executives and releasing sorcery tweets to the company’s board. And with memes and a Pop emojiHe has been seen on social media trying to renegotiate the deal.

In essence, Mr. Musk, 50, turned what was largely a friendly deal into a hostile takeover after the fact. His actions have provoked Twitter, regulators, bankers and lawyers about what he can do next and whether the blockbuster deal will be completed. And Mr. Musk has made the corporate raiders of the past relatively eccentric in a relatively positive way.

“Elon Musk plays in his own gray area – you can almost tell by his own rules,” said Robert Wolfe, former US chairman of Swiss bank UBS. “It’s definitely a new way of doing things,” he said.

Mr. Musk did not respond to a request for comment.

On Thursday, Twitter executives said at a company meeting that Mr. Musk’s purchase was moving forward and they would not renegotiate, the two attendees said on condition of anonymity. Earlier this week, the company’s board also announced that “we intend to close the transaction and implement the merger agreement.”

Twitter’s board has argued that it has a legal upper hand in the deal. In addition to the 1 billion breakup fee, an agreement with Mr. Musk includes a “special performance clause” that gives Twitter the right to sue him and force him to complete or pay off the transaction, as long as the debt he owes remains intact.

“He signed the binding agreement,” said Edward Rock, a professor of corporate governance at the New York University School of Law. Musk. “If these agreements can’t be enforced, that’s a problem for every other deal.”

Twitter did not respond to a request for comment.

Mr. Musk is already pushing some legal boundaries. The Federal Trade Commission is investigating whether the billionaire violated advertising requirements by failing to notify the agency that he acquired a large stake in Twitter earlier this year, a source familiar with the inquiry said. Investors must generally notify regulators of large share purchases to give government officials 30 days to review transactions for competition breaches.

The FTC declined to comment. Information, a tech news site, formerly Mr. FTC. Musk.

The archetype of the hired corporate buyer has existed for decades. Baron Jay Gold, a late 19th-century robber who helped build the US railroad network system, partially funded the wealth deals amassed through Wall Street gambling. He consolidated the dead railroad and was known to plant rumors in the press.

Mr. Gold, writes Edward Renehan Jr., one of his biographers, was a “master of margins” who was able to “create capital out of thin air and gain control over companies using only a few dollars reflected in the halls of financial mirrors: convertible bonds, proxies and leverage”. . “

In the same decade Mr. Campio used the purchase to build a retail empire that included Bloomingdale and Abraham and Strauss, who eventually succumbed to the debt imposed on them. A new kind of hostile raider also appeared – private equity firms – who devised take-no-prisoner takeover tactics, memorably written in the 1989 book “Barbarians at the Gate” about the acquisition of private equity firm KKR and its RJR Nabisco.

In recent years, deals that have fallen apart or been renegotiated are not uncommon. After a ર્ટ 25 billion consortium of financial firms sold itself in 2007, lending giant Sally Mae, a credit crunch erupted and new legislation jeopardized her finances. The buyers tried to recover the deal, the insult flew, and the attempt failed.

That same year, a $ 6.5 billion deal was struck by Apollo Global Management – a chemical company he owned, Hexion, joined a rival, Huntsman – when Huntsman’s earnings plummeted and each side sued. In 2016, telecom giant Verizon slashed its માટે 4.5 billion value for Yahoo’s Internet business as Yahoo revealed it had suffered a “massive security breach.”

Yet in many of these deals, the arguable “material adverse changes” – whether it was a financial crisis or a security breach – were behind the price change or the end of the acquisition. Not so with Twitter and Mr. Musk, where no apparent factor has been encountered in trying to change the form of the agreement. (Mr Musk, who has taken up the issue of the number of bots on Twitter, said he doubted the veracity of the company’s public filing.)

Mr. Musk seems to be free to do as he pleases in the deal, partly because of his extraordinary personal wealth, with a total wealth of about $ 210 billion, and he allows it to ignore the economics of the deal. And unlike a private equity firm, it doesn’t buy multiple public companies in a year, which makes it less important to constantly present itself as close.

When Mr. Musk is responsible for the shareholders of other companies he operates – including publicly traded car maker Tesla – those shareholders usually invest in his efforts because he is an inventor, not a deal maker.

Anne Lipton, a professor of corporate governance at Tulane Law School, said most of the things that keep the world of mergers and acquisitions within its boundaries are “dignified sanctions.” But Mr. Musk, she noted, “does not care about decent sanctions.”

And that leaves everyone to guess.

Mike Isaac And Cecilia Kang Contribution Report.

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