Elon Musk, the chief executive officer of Tesla and the world’s richest person, said on Friday he was terminating his $44 billion deal to buy Twitter because the social media company had breached multiple provisions of the merger agreement.
Twitter’s chairman, Bret Taylor, said on the micro-blogging platform that the board planned to pursue legal action to enforce the merger agreement.
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk…,” he wrote.
In a filing, Musk’s lawyers said Twitter had failed or refused to respond to multiple requests for information on fake or spam accounts on the platform, which is fundamental to the company’s business performance.
“Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” the filing said.
Musk also said he was walking away because Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter’s obligation to “preserve substantially intact the material components of its current business organization.”
LEGAL BATTLE
Musk’s decision is likely to result in a protracted legal tussle between the billionaire and the 16-year-old San Francisco-based company.
Disputed mergers and acquisitions that land in Delaware courts more often than not end up with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away, rather than a judge ordering that a transaction be completed. That is because target companies are often keen to resolve the uncertainty around their future and move on.
Twitter, however, is hoping that court proceedings will start in a few weeks and be resolved in a few months, according to a person familiar with the matter.
There is plenty of precedent for a deal renegotiation. Several companies repriced agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.
