Musk’s Twitter Buyout Challenged by Florida Pension Fund (2)

[Gunnar Larson]

https://news.bloomberglaw.com/securities-law/musks-twitter-buyout-challenged-by-florida-police-pension-fund

Musk’s Twitter Buyout Challenged by Florida Pension Fund (2)

Elon Musk’s $44 billion buyout of Twitter Inc. was challenged in a lawsuit
by a Florida pension fund that argues the deal can’t close before 2025
because Musk was an “interested shareholder” in the social-networking
platform.

The Orlando Police Pension Fund filed suit in Delaware Chancery Court
<https://courts.delaware.gov/chancery/> on Thursday. According to the
complaint, Musk had agreements with other major Twitter shareholders --
including founder Jack Dorsey -- to rely on their holdings when offering to
take the company private last month. Those arrangements triggered a
Delaware law that calls for a three-year delay in closing such deals, the
fund claims.

Musk’s Twitter acquisition features one of the biggest leveraged buyout
deals in history. He’s taking private a 16-year-old social networking
platform that has become a hub of public discourse and a flashpoint in the
debate over online free speech. Musk disclosed Thursday a group of
investors were kicking in more than $7 billion of equity towards the deal.
They include Oracle Corp. billionaire Larry Ellison, venture-capital
firm Sequoia
Capital and cryptocurrency exchange Binance Holdings Ltd.

A representative for Musk didn’t immediately return an email seeking
comment on the pension fund’s suit.

Musk, 50, has outlined financing for the deal that includes $13 billion in
bank loans secured by the social-media company and $12.5 billion backed by
a pledge of some of his $170 billion Tesla Inc. stake. He’s currently the
world’s richest individual, with a fortune valued at more than $249 billion.

The pension fund’s lawyers note Musk owned about 10% of Twitter’s shares
when he made his buyout offer. They also say in the complaint that he had
an “agreement, arrangement or understanding” with other major Twitter
investors, such as Dorsey and investment bank Morgan Stanley. Those pacts
allowed Musk to rely on their shares and support for the deal, according to
the suit.

Under Delaware corporate law, those agreements make Musk an “interested
shareholder” who has to wait three years to close the deal or win the
support of investors who control “at least 66 2/3% of Twitter’s outstanding
voting stock” and were independent from the billionaire, the suit said.

The fund is asking a Delaware judge to find that Musk meets the test for an
“interested shareholder” and is subject to the law, according to the
complaint.

The statute cited by the Florida fund was passed by Delaware lawmakers in
the 1980s to help address a boom in takeovers and to protect shareholders’
rights to vote, but it won’t pose much of a barrier for Musk, said Charles
Elson, the former director of the Weinberg Center for Corporate Governance
at the University of Delaware.

“Its an extremely high wall to show someone was an interested shareholder,
and few have surmounted it over the years,” Elson said.

The case is Orlando Police Pension Fund v. Twitter Inc, No. 2022-0396,
Delaware Chancery Court.
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