Musk raises Twitter offer to $46.5 billion
Tesla boss presents financing package – buyout group Thoma Bravo talks to him about participation in takeover
Elon Musk has unveiled a $46.5 billion financing package to fund his takeover bid for Twitter, which would represent one of the largest leveraged buyouts in history.
The billionaire Tesla boss has borrowed $25.5 billion from a group of banks led by his financial adviser Morgan Stanley -- including a $12.5 billion margin loan for his shares in the electric-vehicle maker.
Separately, he said he would provide $21 billion in equity for the deal, according to filings with the Securities and Exchange Commission on Thursday, though he gave no further details about the source of that portion of the funding.
The offer means Musk must come up with $33.5 billion, or more than 70% of the funding package, though he could bring in co-investors to fund the equity portion of the deal.
Securing funding is a crucial milestone for the headstrong entrepreneur, who last week made a hostile $43 billion bid to privatize Twitter. Completion of the transaction would transform Musk into a social media baron with the power to control what he has described as "the world's de facto public marketplace."
The San Francisco-based social media giant acknowledged receipt of Musk's "updated, non-binding proposal" but did not provide a formal response, merely stating that the board has a duty to conduct a careful, comprehensive, and considered "review" of the offer.
However, the Twitter executive has already taken a stand against Musk. Last Friday, he introduced a "poison pill" that would thwart a hostile takeover by making it highly uneconomic for anyone to buy more than 15 percent of Twitter's stock on the open market.
Musk is expected to use the funding package to pitch a takeover bid to Twitter shareholders in the coming days, which will put pressure on the social media company's board to negotiate with him.
Musk has a dozen lenders -- including Bank of America, Barclays, MUFG, and Credit Suisse -- providing debt and the margin loan backed by his $62.5 billion in Tesla stock . The debt package includes a $6.5 billion senior bank loan, a $500 million revolving credit facility, and $6 billion in bridge loans spread across secured and unsecured loans from seven of the banks.
Twitter has hired JPMorgan Chase and Goldman Sachs to advise on the hostile takeover bid.
Now that Musk has an initial funding package in place, private equity investors will be evaluating whether to participate, either as a debt holder or as an equity partner.
Software buyout group Thoma Bravo, which has more than $100 billion in assets, has started talks with Musk about getting involved in his takeover effort, according to a source familiar with the situation. The prospect of a stake in Musk's bid, first reported by the New York Post, would be critical to raising additional debt and equity financing from institutional investors, according to several prominent lenders. Thoma Bravo declined to comment.
Lenders in the private lending market have told the Financial Times that they expect the company to be able to raise more than $10 billion in debt and billions more in preferred stock.
Given the risk of the $13 billion in debt being used to fund the deal, it's expected that many of the banks funding the offering will seek to quickly sell that debt on to third-party investors, including private credit managers like Apollo Global Management.
Other big lenders like Blackstone Credit are awaiting a financing package before deciding whether to participate, people familiar with their deliberations said.
The privatization of Twitter remains controversial in the buyout industry as some of the industry's biggest players such as Blackstone, Vista Equity Partners and Brookfield Asset Management are not interested in participating in a takeover bid, sources told the FT.
Silver Lake and Elliott Management, two major shareholders who backed Twitter CEO Parag Agrawal when he succeeded co-founder Jack Dorsey in November, have not commented on whether they are interested in participating in Musk's takeover bid.
Twitter shares closed Thursday up 0.8 percent.