Thread by @KHendersonCo

$TWTR filed its merger agreement with @elonmusk this afternoon after the market closed, so let's dig in and see what we can learn! 🧵

@elonmusk 1/ As is usually the case with public M&A, it's a reverse triangular merger. Twitter Inc. survives the merger as a private, wholly-owned subsidiary of X Holdings I, Inc. (subtle shout out to the Model X?). All-cash deal.

@elonmusk 2/ Deal is sure thing yet. Must go to special shareholder meeting, which is not a quick process. Not all SHs will approve the deal. Some will join class actions to try to extract more money. See this thread for more:

https://twitter.com/SMB_Attorney/status/1518947960297562112?s=20&t=efezjzEtlfNhyF55qvCqLw

@elonmusk 3/ Each existing share of $TWTR is cancelled and converts into the right to receive $54.20 per share. payment to shareholders isn't immediate. Logistically, money is deposited with a paying agent and SHs submit shares to paying agent to receive cash.

@elonmusk 4/ Paying agent sends notices to SH's with instructions on the exchange. All of that information will also be publicly filed. For SH's that vote the deal have other protections under Delaware law and are paid out separately.

@elonmusk 5/ Reps and warranties don't survive closing, which means effectively reps and warranties being true is just a closing condition. Company reps only 10 pages long. Pretty short for a $44B go private transaction.

@elonmusk 6/ Sets the tone for any potential competing bids. While no indemnity is the norm in public mergers, keep in mind no indemnity is pretty rare in private M&A generally. You don't see that very often.

@elonmusk 7/ Both parties agree to take "all steps necessary" (not just "reasonable" steps) to consummate merger, including "the sale or other disposition of such assets or businesses as are required to be divested". This is rare - normally carve out sales of assets

@elonmusk 8/ Perhaps low risk given Elon's diversified portfolio, but technically if DOJ says he can't own both Twitter and Starlink, this provision could obligate him to have to sell Starlink to ger regulatory approval. Probably low risk here, which is why he agreed.

@elonmusk 9/ Many of the covenants are not just the acquiring company but also the "Equity Investor". In other words, @elonmusk personally is agreed to these covenants.

@elonmusk 10/ Section 6.5(d) could become important - it's what allows $TWTR to consider superior bids. If Board receives a better proposal, they can accept as their obligation is to maximize SH value, not necessarily buyer's value. BUT...

@elonmusk 11/ Must give @elonmusk 4 business days' notice and "negotiate . . . in good faith" to amend the agreement. So, Elon gets a chance to beat any better proposal that comes in. Changes to a better proposal get communicated again with 3 business days to match/beat

@elonmusk 12/ This means Elon could end up in a bidding war if an interested enough buyer wanted to, but as first mover he gets last chance to beat the competing bid or walk away.

@elonmusk 13/ Massive financing component here, but no financing condition. So, Elon is under the gun to ensure his financing is available at Closing or he breaches the merger agreement.

@elonmusk 14/ Another entity, X Holdings III, LLC, setup as margin loan borrower to hold $TSLA shares as collateral for a loan up to 20% of purchase price.

@elonmusk 15/ $1.0B break up fee paid by $TWTR in the event $TWTR terminates the agreement for a better proposal. Effectively a tax on a competing bid. Would have to be in excess of $1.0B higher in purchase price to merit terminating deal, and Elon can always counter.

@elonmusk 16/ $1.0B reverse termination paid by buyer if breaches the agreement or fails to close when conditions are satisfied (again, financing not a condition, so if can't close because financing fails, buyer owes a $1.0B to walk away).

@elonmusk 17/ For you #SMBTwit folks, here's something you all see frequently but the public M&A world rarely sees - termination fee is PERSONALLY guaranteed by @elonmusk. So when you sign that personal guarantee for the SBA, you're in good company!

@elonmusk 18/ That's all for now. There will probably be more as I read the agreement more carefully, but all in all a very favorable agreement to $TWTR, making a Board decision to fight the bid more difficult.

@elonmusk DISCLAIMER: I'm a lawyer but not your lawyer. Nothing in this thread is legal or investment advice. Don't take legal advice from $TWTR.

*isn't.

Damn, now I'm that guy. 🤦‍♂️