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Twitter Lawyers Respond To Elon Musk: "Deal Termination Is Invalid And Wrongful"

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by Tyler Durden
Monday, Jul 11, 2022 - 09:02 PM

As the twitter court trial/legal settlement drama begins its dismal lifecycle, moments ago Twitter's law firm Wachtell Lipton, where none other than Former Delaware Supreme Court Chief Justice Leo Strine serves as counsel effectively assuring an outcome favorable to Wachtell and thus its client, Twitter, lobbed its first official response to the Friday afternoon blockbuster from Elon Musk in which the world's richest man decided he had had enough of toying with Twitter and decided to announce the termination of his plans to buy the social network.

Well, not so fast (of course): according to Wachtell which argues that Musk's termination "is invalid and wrongful, and it constitutes a repudiation of their obligations under the Agreement" and adds that "contrary to the assertions in your letter, Twitter has breached none of its obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Company Material Adverse Effect."

And since the the "termination is invalid for the independent reason that Mr. Musk and the other Musk Parties have knowingly, intentionally, willfully, and materially breached the Agreement, including but not limited to Sections 6.3, 6.8, and 6.10 thereof", the "Agreement is not terminated, the Bank Debt Commitment Letter and the Equity Commitment Letter remain in effect, and Twitter demands that Mr. Musk and the other Musk Parties comply with their obligations under the Agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Agreement."

The full letter from Wachtell Lipton's William Savitt below (link):

Re:    Purported Termination of Agreement and Plan of Merger

Dear Mr. Ringler:

This letter is sent on behalf of Twitter, Inc. (“Twitter” or “the Company”) in response to your July 8, 2022 letter, in which X Holdings I, Inc. purports to terminate the Agreement and Plan of Merger (the “Agreement”) by and among Twitter, X Holdings I, Inc. (“Parent”), X Holdings II, Inc. (“Acquisition Sub”), and Elon R. Musk (together with Parent and Acquisition Sub, the “Musk Parties”). Capitalized terms used here and not otherwise defined have the meanings ascribed to them in the Agreement.

Mr. Musk’s and the other Musk Parties’ purported termination is invalid and wrongful, and it constitutes a repudiation of their obligations under the Agreement. Contrary to the assertions in your letter, Twitter has breached none of its obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Company Material Adverse Effect. The purported termination is invalid for the independent reason that Mr. Musk and the other Musk Parties have knowingly, intentionally, willfully, and materially breached the Agreement, including but not limited to Sections 6.3, 6.8, and 6.10 thereof. The Agreement is not terminated, the Bank Debt Commitment Letter and the Equity Commitment Letter remain in effect, and Twitter demands that Mr. Musk and the other Musk Parties comply with their obligations under the Agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Agreement (including by taking all steps necessary to obtain a favorable outcome under the United Kingdom’s National Security and Investment Act 2021), the Bank Debt Commitment Letter, and the Equity Commitment Letter. As it has done, Twitter will continue to provide information reasonably requested by Mr. Musk under the Agreement and to diligently take all measures required to close the transaction.

Twitter reserves all contractual, legal, and other rights, including its right to specifically enforce the Musk Parties’ obligations under the Agreement.

 
Sincerely,

William Savitt
Wachtell, Lipton, Rosen & Katz

This is just the obligatory next step before Twitter sues Musk in Delaware Court of Chancery, where the outcomes are four:

  1. Musk prevails, and gets away with terminating the deal without paying anything.
  2. Twitter prevails, Musk is forced to pay $1 billion in "termination fee" damages for breach of contract.
  3. Twitter prevails, Musk is ordered to pay $44 billion in specific performance, and ends up buying Twitter at the original purchase price.
  4. Twitter and Musk settle for a purchase price somewhere between $54.20 and $30.00

We believe "4" is the most likely conclusion to this soap opera, even if Musk is confident that 1 (or perhaps 2) is the only outcome.

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