Twitter cites UK national security law in legal letter to Musk as $44bn deal falters
Twitter cited new UK law in a legal letter to Elon Musk, in what lawyers say may indicate the UK government had concerns about what the $44 billion deal would mean for UK national security .
Twitter’s legal team demanded the billionaire meet his obligations under the merger agreement “including taking all necessary steps to secure a successful outcome under UK national security and investment law. 2021,” according to a July 10 letter to Musk’s lawyers.
The social media platform’s legal team sent the letter after the Tesla boss said on July 8 that he would walk away from the $44 billion deal.
‘Relaxing controls around disinformation could concern national security,’ a UK antitrust partner said, adding he wouldn’t be surprised if the UK government wanted to know more about how Musk would ‘control disinformation’ .
Twitter, which did not immediately respond to a request for comment, may have cited the law due to UK government actions, possibly a “formal appeal” or a “more informal information-gathering request.” “said a business partner.
The UK government could also consider who could provide financial support to Musk, one of the partners added, to understand “what their intentions might be and what levels of control they might have”.
The UK rules cited in the letter came into force in January. They require companies and investors to notify the government of certain acquisitions in 17 “sensitive” areas of the economy, ranging from defense and energy to transport and emergency services, but also include sectors such as communications and data infrastructure. In theory, the UK could block the deal based on compliance with this law.
Although Twitter is listed in the US and Musk is a US citizen, legal experts said the lifting of the law is a sign that the UK government may at least have an eye on what the deal could mean for his own interests.
“The jurisdictional element is not controversial; for the NSIA to apply, the UK government would only have to establish that Twitter is carrying on business in the UK or providing goods/services to people in the UK,” says Dominic Long, partner at the firm. attorneys Allen & Overy.
The act also allows the government to review and – if necessary – intervene in other acquisitions into the UK economy that could harm its national security. Under the rules, the business secretary has the power to request additional information to weigh an acquisition or call people to testify about potential deals. Businesses could be hit with a fine of up to 10% of turnover if they fail to comply with government demands.
BEIS said it does not comment on individual transactions or the hypothetical application of the law to specific companies. The department monitors the market at all times to identify acquisitions of potential national security interest, he added.
The involvement of the UK government in agreements with an international element is not unprecedented. In May, he called for a full national security assessment of French media company Altice’s acquisition of 6% of BT shares.
“The law is broad and, as we saw in the BT review, communications is a sensitive sector,” said another business partner.
The letter from Twitter lawyers – signed by William Savitt of Wachtell, Lipton, Rosen & Katz LLP – to Mike Ringler of Skadden, Arps, Slate, Meagher & Flom, who acts for Musk, is just one page long. No other international antitrust or financial services legislation is mentioned. Both individuals have been approached for comment.
The antitrust lawyer said that while some of the sectors among the 17 sensitive areas of the economy are clearly defined, others like communications have much looser definitions.
“It’s weird to draw [the Act] so clearly in what was otherwise a short letter,” they said. “Instinctively, I would not exclude that it falls under part of the communications sector”.
A competition and regulatory lawyer added that artificial intelligence is another of the sensitive areas where the government must be aware of transactions, and that Twitter could fall into this area under any research on “identifying or the tracking of objects, people or events”. ” — an activity specifically identified as being subject to the notification obligation.
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“Even if it’s not under the mandatory scheme, the government could indeed call you if they have any concerns about the deal, provided you can show that Twitter had activity in the UK,” the antitrust partner added. .
Twitter’s filings with the Securities and Exchange Commission refer to the need to clarify foreign investment laws in terms broad enough to encompass national security and investment law, the antitrust attorney said.
Musk faced similar national security scrutiny in the United States in May, Reuters reported, after securing support from Saudi Prince Alwaleed bin Talal, Qatar’s sovereign wealth fund and crypto exchange Binance to help fund his Twitter purchase. The US government was already looking to probe deals involving the likes of social media platform TikTok.
The $54.20-per-share deal for Musk to buy Twitter is in limbo, if not dead, as the social media company’s head filed a lawsuit on July 12, claiming that after signing the agreement by Musk, he “apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, destroy the business, disrupt its operations, destroy the value shareholders and walk away.
While some lawyers point to the inclusion of UK law as a hint of further procedural issues, there could still be drama to come.
A competition practice official said: “We are of course currently considering a rather difficult stalemate on the conditions precedent of the merger agreement, so that Twitter’s lawyers will report the breach of the relevant conditions. It will be interesting to watch.”
To contact the author of this story with comments or news, email Justin Cash