Twitter forms a team of lawyers to sue Musk for abandoning a $44 billion acquisition – yqqlm

On July 11, according to foreign media citing people familiar with the matter, Twitter has hired Wachtell, Lipton, Rosen & Katz LLP, a heavyweight law firm in the field of mergers and acquisitions, to form a special team of lawyers to sue Tesla CEO Egypt. Elon Musk Abandoning breach of contract to buy Twitter for $44 billion.

People familiar with the matter said,Twitter plans to file lawsuit this week. By hiring Wachtell, Lipton, Rosen & Katz LLP, Twitter has access to barristers including Bill Savitt and Leo Strine. Among them, Sterling served as president of the Chancery Court in Delaware, where Twitter’s lawsuit happens to be heard.

Meanwhile, Musk has hired Quinn Emanuel Urquhart & Sullivan LLP. The firm helped him successfully win a defamation lawsuit in 2019 and represented him in the current shareholder lawsuit,The case involved his attempt to take Tesla private in 2018.

Delaware is home to more than half of all U.S. public companies, including Twitter.Home to over 60% of Fortune 500 companies. There, justices can hear cases without a jury but cannot award punitive damages. Previous M&A cases have shown that lawsuits to end deals can end within months, often ending in a settlement to avoid further disputes.

Savitt is a partner at Wachtell, Lipton, Rosen & Katz LLP and a leading equity court litigator. In Delaware, companies such as health insurer Anhim, real estate giant Sotheby’s and financial giant KKR & Co. turn to Savitt when deals fail or acquisitions are challenged.

Sterling has worked in Delaware courts for more than 20 years, most recently as Chief Justice of the state’s Supreme Court, where he has helped shape many of the legal norms related to mergers and acquisitions. Stirling joined Wachtell, Lipton, Rosen & Katz LLP in 2020. Before becoming chief justice, Sterling served as a Delaware justice since 2011 and an associate justice since 1998.

Delaware Chancery Courts generally disapprove of efforts to withdraw from merger agreements,Musk needs to prove he has legal grounds for abandoning Twitter acquisition. In regulatory filings, Musk’s lawyers said Twitter’s failure or refusal to respond to multiple requests for information about fake or spam accounts on the platform was critical to the company’s business performance. “Twitter substantially violated multiple terms of the acquisition agreement by making false and misleading statements in information Musk relied on in entering into the merger agreement,” the filing said.

Musk also said that the reason why he decided to abandon the acquisition,It’s because Twitter fired multiple senior executives and a third of its talent acquisition teamviolating Twitter’s obligation to “keep existing components of the business organization largely intact.”

There are many precedents for renegotiating merger agreements. In 2020, when the Covid-19 pandemic struck and triggered a global economic shock, several companies repriced acquired acquisitions that had been struck. For example, French retailer LVMH threatened to pull out of a deal with Tiffany & Co, but eventually agreed to lower the purchase price by $425 million to $15.8 billion.

In 2000, Tyson Foods agreed to acquire rival IPB Corporation. But soon after agreeing to the deal, the meat market slumped sharply, hurting the financials of both companies. Tyson argues that IBP provided misleading information about its business, so it is no longer obligated to complete the $3.2 billion merger.

In court, Sterling disagreed with the assertion that there was a material adverse change in Tyson and ruled that Tyson must insist on closing the deal. The ruling was a milestone, and the Tyson-IBP case remains an important reference for courts and companies to interpret the buyer’s ability to terminate the merger agreement.

“I would say that Twitter is in a good legal position to argue that it provided Musk with all the necessary information, the latter is looking for an excuse to get out of the deal.”

But Daniel Ives, an analyst at Wedbush Securities, said Musk’s exit would be bad news for Twitter. “This is a disaster for Twitter and its board, as now the company will be in a protracted lawsuit with Musk to close the deal or get a minimum $1 billion breakup fee,” he said.

Judges also have a say in whether the party who exits first must pay a “breakup fee.” In the Musk-Twitter deal,The cost is $1 billion. Twitter Chairman Bret Taylor responded and insisted that the deal be enforced in what would be an uphill court battle.

After Musk took a stake in Twitter in early April, the stock surged, shielding it from a sharp sell-off in the stock market. But after he agreed to buy Twitter on April 25, Twitter shares began to fall within days as investors speculated that Musk might pull out of the deal. Shares in Twitter fell to their lowest level since March, following Friday’s slump after the market opened.