With Elon Musk waffling on his commitment to buy Twitter for $44 billion, Twitter’s board of directors yesterday said it intends to enforce the merger agreement at the original price.
“The Board and Mr. Musk agreed to a transaction at $54.20 per share. We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement,” the Twitter board said in a statement reported by CNN and other media outlets. Twitter on Tuesday also released a preliminary proxy statement laying out reasons shareholders should approve the deal.
“Twitter is committed to completing the transaction on the agreed price and terms as promptly as practicable,” the company said in a press release announcing the proxy statement.
The sale agreement lets either Twitter or Musk kill the deal and pay a breakup fee of $1 billion under certain circumstances. For example, Musk would have to pay the termination fee if he “fails to consummate the Merger as required pursuant to, and in the circumstances specified in, the Merger Agreement.”
However, Musk can’t necessarily get out of it based solely on his complaints about the number of spam accounts on the social network. As Bloomberg wrote, the merger agreement also “includes a specific performance provision that allows Twitter to force Musk to consummate the deal, according to the filing. That could mean that, should the deal end up in court, Twitter might secure an order obligating Musk to complete the merger rather than winning monetary compensation for any violations of it.”
That provision can be found in section 9.9 of the merger deal. If Twitter meets its obligations under the agreement, it “shall be entitled to specific performance or other equitable remedy” to “cause the Equity Investor [Musk] to fund the Equity Financing, or to enforce the Equity Investor’s obligation to fund the Equity Financing directly, and to consummate the Closing,” the agreement says.
Twitter and Musk agreed that if either party fails to take required actions to consummate the agreement, there would be “irreparable damage for which monetary damages, even if available, would not be an adequate remedy.” Twitter or Musk would thus “be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.”
The deal also has a non-disparagement clause that says Musk can tweet about the merger “so long as such Tweets do not disparage the Company or any of its Representatives,” but Musk has repeatedly criticized Twitter and its representatives since signing the deal.