Musk’s bid to take Tesla private gaining traction
Special committee to study offer
SAN FRANCISCO •An Australian telecom executive, the leader of a cosmetics company, and the former finance chief of Elon Musk’s solar-power company are now in charge of deciding
Tesla Inc.’s fate.
The board of the electriccar maker formed a special committee to evaluate its chief executive officer’s proposal to take the company private, a day after he revealed more on who will advise him and help fund the potential deal. Directors Brad Buss, Robyn Denholm and Linda Johnson Rice compose the committee, which hasn’t received a formal proposal from Musk, according to a statement Tuesday. They haven’t reached any conclusion on whether taking the company private is advisable or feasible.
Musk, 47, set off a firestorm a week ago with his highly unconventional announcement of the effort to take the company private, and since then he has been drip-feeding details in tweets and blog posts that have pre-empted disclosures by Tesla’s board. The chairman and largest shareholder wrote late Monday that he’s getting advice from Goldman Sachs Group Inc. and private-equity firm Silver Lake and has lined up legal advisers. But Goldman Sachs hadn’t been formally tapped as a financial adviser at the time, according to people familiar with the matter. Musk said earlier that Saudi Arabia first approached him with interest in helping take Tesla private early last year.
Musk has said in blog posts that Tesla being public has forced the company to focus on short-term decisions that aren’t consistent with its long-term goals, and that he thinks going private would help the carmaker to operate at its best.
“The bears are dug in, the bulls are dug in, and so the public markets aren’t really functioning properly, or as they should,” James Albertine, an analyst with a buy rating on the shares, said Tuesday on Bloomberg Television. Private stakeholders would be able to “share in that long-term view with Elon and it would be a lot less volatile.”
Tesla shares fell 0.9 per cent to US$353.25 as of midafternoon on Tuesday in New York. The stock remains well below the US$420 level at which Musk has said existing shareholders could be bought out if they choose, underscoring investor skepticism that the deal is doable.
While Tesla considers Buss to be an independent director, major proxy advisory firms Institutional Shareholder Services and Glass Lewis don’t because he served as the chief financial officer of SolarCity Corp. before Tesla acquired the company in 2016.
Denholm is the chief operating officer of Telstra Corp., Australia’s largest telecommunications company. Tesla labels Buss and Denholm as the board’s financial experts on its investor-relations website.
Rice, chairman of Johnson Publishing Co., long known for Ebony magazine, is one of the two newest directors on the board. Tesla appointed her and James Rupert Murdoch, the CEO of Twenty-First Century Fox Inc., to the board in July 2017. Johnson Publishing sold Ebony in 2016, retaining its Fashion Fair Cosmetics business.
Rice has previous experience with deals, including the sale of a public company to private investors. She was on the board of directors for Bausch & Lomb Inc. when it was acquired by Warburg Pincus in 2007 and for Quaker Oats Co. when it was bought by PepsiCo Inc. in 2001. None of the three committee members could be reached for comment.
With Musk recused, brother Kimbal Musk not independent, and director Stephen Jurvetson on leave, the board had only six members to choose from for its committee. Lead director Antonio Gracias, who is chief investment officer of Valor Equity management, presumably would have been eligible, along with Murdoch and venture capitalist Ira Ehrenpreis.
The Tesla board’s special committee has hired Latham & Watkins for legal counsel and plans to retain an independent financial adviser to assist its review, according to the statement. The company has separately retained Wilson Sonsini Goodrich & Rosati for legal counsel.
THE PUBLIC MARKETS AREN’T REALLY FUNCTIONING PROPERLY.