Tesla committee to evaluate possibility of taking firm private
Special committee of three independent directors hasn’t received a proposal from Musk
Tesla Inc.’s directors formed a special committee to evaluate Chief Executive Elon Musk’s suggestion of taking the electricvehicle maker private.
The committee’s three board members are Brad Buss, a director since 2009 and the former finance chief at SolarCity Corp., the solar-power maker Tesla bought in 2016; Robyn Denholm, a director since 2014 and the operations chief at Telstra Corp.; and Linda Johnson Rice, CEO of Johnson Publishing Co., who joined Tesla’s board in 2017.
Companies often form special committees when considering deals that present possible conflicts of interest, such as when a major shareholder or senior official pursues a takeover.
The company Tuesday said the committee hasn’t yet received a formal proposal. The committee named Latham & Watkins LLP as its legal adviser, while the company has retained Wilson Sonsini Goodrich & Rosati.
Late Monday, Mr. Musk said in a tweet he had taken on as advisers several blue-chip names in the worlds of business deals and law: investment bank Goldman Sachs Group Inc., investment firm Silver Lake, and law firms Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson.
Mr. Musk and Goldman executives were still haggling about the terms of any engagement on Tuesday, according to people familiar with the matter.
While it isn’t unusual for banks to take time negotiating the terms of an assignment, the circumstances around the possible Tesla deal are sensitive. The unorthodox way in which it unfolded already is the subject of lawsuits, and Goldman has grown particularly conscious of its reputation in the wake of the financial crisis. Merger-andacquisition engagement letters typically lay out fees and indemnify banks against legal liability.
What’s more, the odds of a deal appear long. Bankers are typically paid only if transactions are completed.
On the other hand, a deal of this size would throw off tens of millions of dollars in fees if it gets done and carry huge marketing value for a bank like Goldman.
A person familiar with Silver Lake’s thinking said it is helping Mr. Musk explore the process of going private, but isn’t being paid, nor sponsoring or participating in any deal.
Tesla’s announcement came a day after Mr. Musk sought to explain why he tweeted last week he had “funding secured” to take Tesla private, saying he had been
approached several times over nearly two years by Saudi Arabia’s sovereign-wealth fund about support for a possible deal.
Mr. Musk’s comments Monday, in a blog posted on Tesla’s website, still left many questions unanswered, including how much capital would be required for a possible deal and whether the Saudi fund is willing to provide it. He made clear no final
deal for financing was in place, saying that while the fund’s managing director expressed support for a privatization, it was subject to due diligence by the fund and to “their internal review process for obtaining approvals.”
The Monday statement also continued what has so far been Mr. Musk’s unusual approach to a possible deal. He shocked investors last week when he said he was considering taking Tesla private and had secured funding for such a deal, which would value the company at more than $70 billion.
The revelation, in a series of tweets, drew scrutiny, including from the Securities and Exchange Commission, which has inquired about Mr. Musk’s basis for writing the tweets. In detailing his talks with the Saudi fund, Mr. Musk has given regulators even more reason to scrutinize how he went about disclosing the information, securities-law experts said.
Mr. Musk, who is chairman and owns about one-fifth of Tesla, has received solid support from Tesla’s board, many of whose members have close relationships to the CEO.
Mr. Buss, for example, had been finance chief at SolarCity, a company founded by Mr. Musk’s cousins and which counted Mr. Musk as its largest shareholder.
The Tesla directors have faced criticism from some investors and advocates, who question their independence and oversight of Mr. Musk, whose personality, vision and celebrity has helped fuel interest in Tesla.
Ms. Rice was named a Tesla director in 2017 following criticism the board lacked independence.