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Elon Musk may have to finalize $44 billion Twitter takeover, legal experts say | Mergers and Acquisitions

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Elon Musk could be forced by a US court to complete his takeover of Twitter for $44 billion, legal experts say, despite the deal being halted.

Tesla’s chief executive told Twitter on Friday he was terminating the deal, citing concerns about the number of spam accounts on the social media platform.

Twitter President Bret Taylor responded with a tweet stating that the company intended to “pursue legal action to enforce the merger agreement”.

The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.

— Bret Taylor (@btaylor) July 8, 2022

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Twitter’s board has agreed to complete the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of Chancery.

— Bret Taylor (@btaylor) July 8, 2022

A legal expert said he expected Twitter to file a lawsuit in Delaware, the US state that has jurisdiction over the deal, as early as Monday.

“They will likely seek a declaratory judgment that they are not in breach of contract. Additionally, they will seek a court order for Musk to specifically perform his obligations under the agreement,” said Brian Quinn, associate professor at Boston College Law School.

Under the terms of the deal, the company can ask a judge for a “specific performance,” which would force Musk to buy the company for the $54.20 per share he agreed to in April. Alternatively, the company can also seek $1 billion in severance pay from Musk for pulling out of the deal in violation of the deal.

Quinn said Musk’s arguments would likely fail in court. In Friday’s letter, Musk made three general arguments: that Twitter violated the agreement by not providing enough information about spam accounts; that Twitter misrepresented the number of spam accounts in its disclosures to the US financial watchdog; and that the company violated the agreement by failing to consult Musk during the recent layoff of senior employees.

Quinn said Musk’s requests for information about spam accounts were not “reasonable” and would not be accepted by the court. “He cannot use unreasonable requests for information to create a pretext to claim a breach,” he said.

John Coffee, a law professor at Columbia University, said: “Musk is on very weak legal footing. Twitter seems to have given him access to just about everything to satisfy his desire to know the percentage of bots among his users.

Carl Tobias, Williams Professor of Law at the University of Richmond, said: “Musk’s case does not appear to give him strong legal grounds to pull out of the deal. His attorney has only made allegations and arguments in favor of Musk’s position and the judges would have to decide whether the evidence Musk would present is compelling enough to justify ending the deal.

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However, Tobias added that the two parties could agree to settle rather than end up in a situation where Musk is forced to buy a business he no longer wants. Analysts have warned that a protracted legal battle could further hurt Twitter’s stock price and employee morale. A settlement with Musk would draw a line under the case.

“Most similar disputes typically end in settlements that allow both plaintiffs and defendants to save face,” Tobias said.

Analysts have also speculated that Musk could use the legal battle to secure a lower price for Twitter, though investors should also consider legal action if the deal falls through at $54.20 per share and sue. for the difference between the sale price and the current stock price. Twitter is currently trading at $36.81 per share.

“I doubt the court will rule before there’s a settlement, and Twitter’s day-to-day price will give you an idea of ​​what Musk’s side are hoping to pay,” Coffee said.