Bankers eye £1bn Twitter fees bonanza
THE proposed £35bn takeover of Twitter by Elon Musk looks set to trigger a £1bn fees bonanza for bankers working on the deal.
The biggest beneficiaries are likely to be the high flyers at Morgan Stanley who are advising Musk on the takeover having already helped him secure £20bn in funding for the deal.
They are likely to scoop a large portion of the fees - if the deal goes through.
Last night Twitter shares closed at $48.64 – some way below Musk’s $54.20 offer price in a sign that some investors believe the deal could collapse.
Other banks eyeing a bumper pay day include Bank of America and Barclays, who are also advising Musk, as well as Goldman Sachs, JPMorgan Chase and Allen & Co who are acting for Twitter. Dan Ives, analyst at investment firm Wedbush, said: ‘This is one of the biggest leveraged buyouts in history. It’s complex, involves complicated financing and there are regulatory issues to navigate as well.’ The prospect of a fees bonanza came as it emerged Musk has agreed to pay a break clause – or ‘reverse termination fee’ – of £800m if he backs out of the deal. That is just a fraction of his £200bn fortune.
Investment banks usually get about a 1pc to 3pc cut of a merger deal.
Based on the £35bn deal that works out at between £350m and £1.05bn for the banks advising Musk – with Morgan Stanley set for the lion’s share.
Bankers working for Twitter are in line for between £70m and £100m. Morgan Stanley is a fiercely competitive US bank, ranking only behind Goldman Sachs in fees generated in the first quarter of this year. The pay day for Morgan Stanley is even more important given that there has been a slowdown in stock market floats and corporate bond sales in 2022.
Musk has a long-standing relationship with the bank, going back more than a decade. Morgan Stanley was the main underwriter for the Tesla stock market listing in 2010, alongside Goldman Sachs, JP Morgan and Deutsche Bank. And four years ago, when Musk made his unsuccessful attempt to take Tesla private, he hired the bank to help him construct a deal.
Morgan Stanley is also expected to pick up more business from Musk in the coming years, including any possible share sales or equity raisings as he looks to fund Twitter’s expansion. The deal for Twitter was one of the quickest ever put together from start to finish. Musk announced his intention to buy the company on April 14, tweeting ‘I made an offer.’
Bankers on both sides have been working around the clock for the past two weeks in order to make the deal happen.
But there are doubts over whether Musk can juggle being chief executive of Tesla while trying to transform Twitter.
Tesla shares tumbled on Tuesday, falling 12pc and wiping off £100bn of the company’s value. They recovered 3pc to $905 yesterday. Twitter shares were down 2pc.
Ives said: ‘The worry is around Musk being distracted and pulled in too many directions.’