(Bloomberg) — Twitter Inc. has hired merger law heavyweight Wachtell, Lipton, Rosen & Katz LLP as it races to sue Elon Musk for moving to dump his $44 billion takeover of the company, according to people familiar with the matter.
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According to sources, the company intends to file suit in the early part of this week. The people declined to identify themselves because it is confidential. It can hire Wachtell to gain access to Bill Savitt, Leo Strine and other lawyers, which will allow it to present the case at the Delaware Chancery Court.
Musk has brought in Quinn Emanuel Urquhart & Sullivan LLP. This firm was instrumental in Musk’s successful defense of a defamation case in 2019. They are representing him in an ongoing shareholder lawsuit arising from his unsuccessful attempt to privatize Tesla Inc. in 2018.
An official for Wachtell Lipton declined to comment, and officials for Quinn Emanuel couldn’t be reached. Twitter declined to comment. Musk and Jared Birchall the head of Musk’s family office did not respond when asked.
Delaware is home to over half of the US’ public companies. This includes Twitter. More than 60% of Fortune 500 businesses are located in Delaware. There, chancery judges — business law experts — hear cases without juries and can’t award punitive damages. Based on prior merger fights, attempts to terminate a deal may be completed in a few months. Most often, settlements are reached to prevent further wrangling.
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Wachtell partner Savitt is in the top 1% of A-list chancery court litigators. Companies such as health-insurer Anthem Inc., real-estate giant Sotheby’s and financial titan KKR & Co. have lined up outside his door when deals turn sour or buyouts get challenged in Delaware.
Strine, who spent over 20 years working in the Delaware courts, most recently as Chief Justice of that state’s Supreme Court, helped shape the legal norms that Musk will seek to test by terminating his agreement to acquire Twitter. In 2020, Strine joined Wachtell.
He was the Chief Justice before he became the Chief Justice.
The Delaware Chancery Court is known to be against any attempt to renege on merger agreements. It’s possible that one of Strine’s most influential decisions will determine how Musk makes his case for ditching his Twitter takeover.
Tyson Foods Inc. acquired rival IPB Corp. Both companies suffered financial losses as a result of the rapid downturn in the meat market shortly after the agreement was made. Tyson argued it had been given misleading information about IBP’s business and was thus no longer obliged to complete the $3.2 billion merger.
Strine disagreed with Strine that there had actually been a Material Adverse Change. He ruled that Tyson must continue the deal. The Tyson/IBP case was a landmark decision. It is still the basis of how courts and corporations interpret the possibility for a buyer to cancel a merger agreement.
Judges also have the right to decide whether or not breakup fees should be paid. The Musk-Twitter deal has a $1 billion fee.
Musk made a regulatory filing Friday after the market had closed. He announced his intention to withdraw from the $54.20-a share offer to buy Twitter. Musk claimed that Twitter misrepresented its user data. Bret Taylor, the chairman of Twitter, announced that he will enforce the deal in an exhausting court battle.
Twitter shares closed 5.1% lower at $36.81 during official trading and fell another 4.8% to around $35 aftermarket activity.
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