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What Is a Hostile Takeover? Explaining Elon Musk and Twitter

Best and Final

Just a week after announcing he’d acquired an over 9% stake in Twitter (TWTR), Tesla (TSLA) founder Elon Musk made an offer to buy out the rest of the social media giant. Musk indicated he would take the company private if the deal is accepted, allowing him to make the kind of changes he feels are needed to facilitate growth.

Musk, the world’s richest man, said this would be his “best and final” offer. The potential deal would value Twitter at $43 billion. If his offer ends up being rejected, Musk added he may have to “reconsider” his position as a shareholder.

Why So Hostile?

Unlike a negotiated sale of a company, hostile takeovers occur when the acquirer is not working directly with the target company toward reaching an agreement. When hostile takeover bids are launched, the prospective buyer may look to engage shareholders directly, in order to build support for the sale.

Sometimes the acquirer’s plan involves publicly connecting with the target’s existing management in an effort to force their hand. Conversely, companies that are the target of hostile takeovers have a number of strategies they can use to try to prevent it from happening. This includes the “Pac-Man defense,” in which the would-be target tries to buy out the acquirer. With Musk being the world’s richest man, that’s not part of the discussion in the case of Twitter.

The Takeover: A History

n 2010, French pharmaceutical company Sanofi-Aventis (SNY) launched a hostile takeover bid targeting American biotech company Genzyme Corporation. After failing to make progress with a so-called “friendly” takeover bid, Sanofi-Aventis began directly approaching shareholders to build support, and was eventually successful.

Two other well-known hostile takeover bids that eventually succeeded involve some of America’s biggest names in the food and beverage industry. Prior to the Kraft-Heinz (KHC) merger, Kraft purchased Cadbury following a contentious battle with the British confectioner. Just a couple of years prior, Euro-Brazilian beverage company InBev successfully bought out iconic American brewer Budweiser, forming Anheuser-Busch Inbev (BUD).

The odds are Elon Musk’s bid for Twitter will be of historical note, whether it results in a sale or not.

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James Flippin ABOUT James Flippin James Flippin is the son of a financial advisor who grew up hearing and learning about bond yields, interest rates, the stock market, and the ins and outs of Wall Street. After stints as a licensing and business broker for Marcus and Millichap in New York City, James moved into broadcasting and became a reporter and anchor. He covered crime, politics, finance, and tech at NBC News Radio while working part-time as a producer for SiriusXM. James graduated from the University of Delaware with a bachelor’s degree in political science and economics. He's also an accomplished podcaster with over 10-years of experience.

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