NAL - what happens if Musk just refuses to do it and never sends the money? Can Twitter get a court order to garnish Musk's bank account and/or assets for $40B?
I'm NAL either, but most lawyers speaking on this, with knowledge of the clauses thrown into these contracts speculate that he'd be taken to court for breach of contract.
IIRC, previous acquisitions that were attempted to be weaseled out of were forced to go through by the courts, when the acquisitor's finances weren't the issue.
EDIT: Ooh, the contract is public. Guess that makes sense, as it's a public company. Relevant to this, but section 8.1.d is the stanza relevant to this discussion. And the Act I definitions does define the "parent termination fee" at $1B.
Eventually, yes - if they get a judgement against him and he doesn't pay, they can get an order to do that kind of thing. Same way the court system usually works.
> The Merger Agreement also provides that Twitter, on one hand, or Parent and Acquisition Sub, on the other hand, may specifically enforce the obligations under the Merger Agreement, except that Twitter may only cause Mr. Musk’s equity financing commitment to be funded in circumstances where the conditions to Parent’s and Acquisition Sub’s obligations to consummate the Merger are satisfied and the debt and margin loan financing is funded or available. As described above, if the conditions to Parent’s and Acquisition Sub’s obligations to complete the Merger are satisfied and Parent fails to consummate the Merger as required pursuant to the Merger Agreement, including because the equity, debt and/or margin loan financing is not funded, Parent will be required to pay Twitter a termination fee of $1.0 billion.
Ugh, yes, nobody is disputing that. The comment I replied to was using the common, but incorrect, understanding of that to be like a fee that musk would have to pay to cancel the deal, which is pointed out as being an incorrect understanding (and which the text that you quoted also points out is an incorrect understanding). Like, of course, if we just change the meaning of words, then things stated in response to those words may be incorrect.
Correct. It is not a cancellation fee. Musk cannot cancel the contract, only a court can make that determination after concluding that Musk is unable to finance the deal.
I am not a lawyer so I am quite curious as to how that plays out.
Assuming he has it, could the courts force him to sell $40B in assets?
> Assuming he has it, could the courts force him to sell $40B in assets?
In principal, courts could either order him to complete the buyout (specific performance) or make those injured by his failure to do so whole (money damages). If they chose the former and he continued to fail to do so, he could be punished for contempt of court, either civil contempt (including, e.g., progressive fines and/or imprisonment until and unless he complied) or criminal contempt (fines or imprisonment of a set amount of period.)
The fee is to be payed by Musk if the deal falls through for a few soecific reasons: either his financing falls through or a few other conditions (for example, USA blocks the deal).
Doesn't seem fair to shareholders to initiate a buyout procedure that doesn't go anywhere - there is a significant cost to the company because of the pending offer. The same can't be said for the party that initiated the offer. So, the party that initiates the offer also has to include the chance of regulatory action blocking the deal in their estimates, and decide if paying $1B in that contingency is worth. Musk certainly did, or else he wouldn't have signed the contract.
For example, in the case of this acquisition, it seems almost impossible for the government to step in - so, the expected value (in the probability theory sense) of the downside is close to 0.
IIRC, previous acquisitions that were attempted to be weaseled out of were forced to go through by the courts, when the acquisitor's finances weren't the issue.
EDIT: Ooh, the contract is public. Guess that makes sense, as it's a public company. Relevant to this, but section 8.1.d is the stanza relevant to this discussion. And the Act I definitions does define the "parent termination fee" at $1B.
https://www.sec.gov/Archives/edgar/data/0001418091/000119312...
Found via:
https://www.youtube.com/watch?v=_HuY9ZqFAsk