Shortly after Elon Musk announced his bid to take Twitter private for $44B, there was a report he approached private equity houses to help finance the effort and was rebuffed, perhaps because it wasn’t clear that a bid price doubling as a cannabis meme ($54.20 per share) was entirely serious.
Fast forward a month and he’s having more luck. Brookfield is one of 19 equity investors totaling $7.1B in commitments, according to a filing dated yesterday by Mr. Musk. Among the others are Oracle co-founder Larry Ellison at $1B, Sequoia Capital at $800M, and Binance, the crypto exchange, at $500M.
Also, Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud of Saudi Arabia committed 34.9 million shares of Twitter stock and would keep his investment in the company after Musk acquired it. At the buyout price, his stake would be worth about $1.9B.
The specific Brookfield investing entity is not named – the filing says only “Brookfield” – but it would make sense if it were the private equity arm, through the publicly-traded sub (BBU), the private funds, or a combination. The pledge is $250M.
The commitments raise the equity portion of Mr. Musk’s bid to $27B and cut in half the pledged margin loan against his Tesla stock holdings. It seems possible these and/or other entities might make more commitments allowing Mr. Musk to further reduce the debt portion as the deal gets more likely to close. He is reportedly talking to Twitter founder Jack Dorsey about an equity commitment that would allow Mr. Dorsey to remain part-owner of a privatized Twitter.
On a big down day in the markets, TWTR is up 3% on news of the commitments to over $50, leaving an arbitrage opportunity of just under 7%. By way of comparison, there is still about a 20% arbitrage opportunity in the shares of Activision Blizzard, the object of a proposed buyout by Microsoft.