Merger activity increased last week with four new deals announced and four deals completed.
Twitter – Musk Enters Litigation Phase
Last week ended with Elon Musk announcing on Friday, July 8, 2022, that he is pulling out of the Twitter (TWTR) deal, alleging that the company has failed to comply with its contractual obligations. In response, the Twitter Board issued a statement, saying that they are committed to closing the transaction on the agreed price and terms with Mr. Musk and they also plan to pursue legal action to enforce the merger agreement.
This could be yet another tactic by Musk to attempt to get the Board back on the table to renegotiate the deal. When we discussed the Twitter deal in our June 2022 Special Situations Newsletter we wrote the following about the deal,
“The latest developments made me reassess my probabilities of this deal closing and I now think there is a 60% to 65% chance for the deal to complete at the original price of $54.20. I think that the probability of the deal closing at a renegotiated price is about 80%. I think any price cut is likely to be in the 10% to 15% range. Assuming the deal is renegotiated at a 15% haircut to the original price, we get a price of $46.07 or a $6.47 spread from the current price.