Elon Musk may have just inked one of the biggest leveraged buyout deals ever.
Musk is the world's richest person, worth north of US$269 billion according to Forbes. And now he's poised to buy Twitter (NYSE: TWTR) for US$44 billion (AU$60 billion).
The CEO of Tesla Motors (NASDAQ: TSLA) is taking the social networking platform private. This comes after airing complaints about Twitter hampering free speech and other issues dragging on the company's growth potential.
Twitter shares gained 5.6% on Monday.
What Elon Musk is offering Twitter investors
In a deal that many thought might not be realised, Twitter investors will get US$54.20 per share, the company said in a statement yesterday (overnight Aussie time).
That's well above the US$47.25 that Twitter shares were trading for this time last week, and also 4.8% higher than the current Twitter share price of US$51.70.
Though some investors may be eyeing the company's all-time closing highs of US$77.06 set on 26 February 2021 and wondering if Elon Musk might not be getting a steal.
According to the agreement, Twitter cannot accept counterbids from other potentially interested parties.
A word from Twitter's soon to be owner
Elon Musk not only is set to take ownership of Twitter, he already has one of the network's most followed accounts. With more than 81 million followers, Musk comes in at number 8.
As The Motley Fool reported last week, Musk had earlier declined a board seat at Twitter, countering with a takeover proposal.
Commenting on his free speech ambitions for Twitter, Musk said (quoted by Bloomberg):
Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.
The acquisition deal proposed by Elon Musk was unanimously approved by Twitter's board. It's expected to be finalised this year.
Under the deal, Musk is kicking in US$21 billion in equity alongside US$25.5 billion of debt and margin loan financing.
Why Tesla shareholders will be watching Elon Musk closely
Even for the world's richest man, the acquisition of Twitter is no small thing. And it may have implications on Musk's other ventures.
Commenting on the potential ramifications of the mega deal, Ben Laidler, global markets strategist at social investment network eToro, said:
Such a quick capitulation by the Twitter board for a US$54 per share bid, 30% below the stock's price high of last year, likely reflects the tough outlook for the social media sector and the only gradual turnaround impact of Twitter CEO Parag Agrawal.
A successful Twitter bid may also raise concerns for Tesla shareholders with Elon Musk, its CEO, becoming involved in yet another time-consuming venture and potentially selling down part of his 9.1% stake, which is valued at over US$90 billion.
