Elon Musk can’t insult Twitter, as part of an agreement on Wednesday that laid out rules to ensure both sides focus on closing the $44 billion buyout deal.
Jae C. Hong/AP Photo
A Twitter-Musk agreement laid out rules to ensure both sides focus on closing the $44 billion deal.
Both sides agree to pay $1 billion to the other party if they back out of the deal.
The merger also prevents Musk from insulting Twitter.
Elon Musk and Twitter have set out terms and conditions to ensure that they stick to closing the billionaire’s $44 billion buyout offer to take the social media platform private.
According to a new SEC filing released Wednesday, each side agrees to pay the other party a $1 billion penalty if they don’t honor the agreement.
Other details include ensuring that both parties are not distracted by external developments that could impact Twitter’s value before the deal closes.
Here are some of the weird details that ensure that Musk and Twitter focus on closing one of the largest leveraged buyouts in history.
If either party walks away from the deal, they have to pay the other party a $1 billion kill fee
Twitter will have to pay Elon Musk $1 billion if it pulls out of the deal. Likewise, Musk will have to pay the company the same amount if he walks away.
The agreement requires Twitter to stop negotiations with any other potential buyers. It also has to stop actively looking for other buyers.
However, if a potential buyer approaches Twitter and the company is interested, Twitter will have to tell Musk and give him four days to make a better offer. If Musk does so, Twitter has to continue the deal with him. If Twitter goes with the other better offer, the company will need to pay Musk the $1 billion termination fee.
Musk will need to pay the termination fee if he fails to secure funding to finance the deal or changes his mind about purchasing the company. To date, the billionaire has lined up about $13 billion in debt financing, $21 billion from his own equity, and another $12.5 billion through a margin loan that’s secured in part by his Tesla shares, Insider’s Aaron Weinman previously reported.
The filing said the deal closes on October 24, though it allows the termination date to be extended for six months if Musk or Twitter needs more time to meet certain legal or regulatory conditions.
Musk must steer clear of insulting Twitter on Twitter
Photo illustration by Nikolas Kokovlis/NurPhoto via Getty Images
Wednesday’s agreement requires that Musk behave himself while on the social media platform. His tweets must not “disparage the company or any of its representatives,” though Musk “shall be permitted to issue Tweets about the Merger or the transactions contemplated hereby.”
This likely stems from concerns over how Musk’s tweets to his 86 million followers could sway public opinion about the platform.
It appears that Musk may have known such a clause was coming — earlier this month, he deleted a series of tweets critical of Twitter.
However, the filing apparently doesn’t prevent Musk from making fun of others. Last week, the Tesla founder tweeted a mocking comparison of Bill Gates.
Neither Musk nor Twitter can use public backlash against either party or COVID-19 as reasons to pull out of the deal.
Twitter headquarters in San Francisco
Emily Quiles
Wednesday’s agreement put down other rules to ensure that both the Tesla tycoon and Twitter are not distracted by any backlash or external developments and commit themselves to closing the deal.
The document says that public backlash against Musk or Twitter cannot be reasons for them to pull out of the deal.
The clause has practical implications; critics have been vocal about Musk’s plans for the social media platform. Now that he’s expected to run the company, those voices will likely become louder. Senator Warren tweeted on Monday that Elon Musk’s purchase of Twitter was “dangerous for our democracy.”
The agreement also says that COVID-19 (or any pandemic or epidemic for that matter), cyberattack, or any unforeseen regulatory changes, among other factors, cannot be used as excuses for either party to walk away from the deal.
The agreement lays out that Musk is merging Twitter with another company, not acquiring it
The agreement makes it clear that Twitter will be merging into another company that’s owned by Musk. That’s different from Musk buying Twitter outright, which is perceived to be a more hostile approach.
Musk has already laid the groundwork for the merger. He created three separate holding companies called X Holdings I, II, and III, Insider reported previously. The companies were created to acquire or merge with Twitter, “directly or indirectly,” according to SEC filings.
Insider has reached out Twitter and Elon Musk for comment and clarification on the merger.
