Proposed Twitter buyout gets backing

Advisory firms urge shareholders to support deal

“The all-cash offer provides liquidity and certainty of value to shareholders, and there is a clear downside risk of non-approval.” Institutional Shareholder Services

NEW YORK: Two prominent shareholder advisory firms are urging Twitter Inc shareholders to support a proposed takeover by Elon Musk, despite efforts by the world’s richest man to back out of the deal.

Institutional Shareholder Services Inc (ISS) and Glass Lewis and Co both issued reports on Tuesday urging shareholders to vote for the deal.

ISS said that while the situation is “unique,” investors should focus on the details of the proposal itself instead of the noise around it.

The advisory firm said while the lack of an auction for the company would generally be a cause for concern, no other rival bids have

emerged and no shareholders have opposed Musk’s Us$44bil (Rm197bil) offer.

In fact, ISS noted that regulatory filings show several institutional shareholders actually encouraged the board to seriously consider Musk’s offer.

“Together, these considerations diminish concerns about opportunity. Moreover, the all-cash offer provides liquidity and certainty of value to shareholders, and there is a clear downside risk of non-approval,” ISS said in the report.

“In light of these factors, support for the proposed transaction is warranted.”

Glass Lewis said the offer price would give shareholders a relatively attractive exit price and a premium for the company’s unaffiliated shareholders. As such, support for the deal was warranted, it said.

“The matter of how shareholders should vote on the proposed merger is comparatively a straightforward affair, in our view,” Glass Lewis said.

“Considering the worsening expectations regarding the company’s standalone prospects, coupled with the broader market selloff in recent months, we believe the proposed merger very likely represents the best available alternative to maximise shareholder value at this time.”

A Twitter spokesman declined to comment. A representative for Musk wasn’t immediately available for comment.

In April, Musk agreed to acquire Twitter for US$54.20 (RM243) a share in what would be one of the largest leveraged buyout deals in history.

Within weeks, the billionaire, who owns about a 9.6% stake in Twitter, cooled to the idea of acquiring the company and said he planned to terminate the deal in July.

He alleged that Twitter misled the public about the number of automated accounts, known as spam bots on its platform, and used that as the rationale for vacating the deal.

San Francisco-based Twitter has refused to let Musk out of his commitment. The matter will now play out in a Delaware court that has historically frowned on efforts to scrap merger agreements and could result in a verdict forcing Musk to buy Twitter, or possibly an out-of-court settlement.

The trial is slated to begin on Oct 17.

“While the outcome of the litigation could impact the proposed transaction, in that the deal could be delayed or terminated, it appears that the most prudent course of action for shareholders at this juncture is to focus on the fundamentals of the transaction itself,” ISS said.

The matter is slated to go to a shareholder vote on Sept 13.

Accusations by a whistle-blower last week, including claims of “egregious deficiencies” in the platform’s defences against hackers and privacy issues, have given Musk new ammunition in his case against Twitter.

His lawyers sent a letter to their Twitter counterparts on Tuesday claiming that the whistle-blower’s allegations mean that Twitter breached the terms of the merger agreement.

Twitter’s lawyers responded, saying that Musk’s case for termination of the deal is “invalid and wrongful.”