Twitter and Elon Musk will owe each other $1 billion if one of them backs out of the $44 billion deal they struck on Monday, according to a document detailing the merger.
Musk agreed to buy the company after a brief negotiation over matters other than price, as the billionaire made it clear that the $54.20 a share offer was his “best and final”.
Twitter detailed some of those terms in a document on Tuesday, including that it would owe Musk $1 billion if the company agreed to be sold to someone else or if its shareholders voted against the deal. Musk owes Twitter $1 billion for a variety of reasons, including if he can’t close the deal because the funding — $13 billion in debt, $12.5 billion in margin loans and $21 billion in equity that he plans to provide himself – not materialize.
The size of the spin-off fees, at just over 2% of the deal value, is average for similar transactions. Also called termination fees, penalties are intended to prevent parties from breaking agreements and address the expense and inconvenience of a failed agreement. The social media company initially resisted Musk’s advance, but when he got funding, he became more supportive.
