By Chibuike Oguh and Krystal Hu
(Reuters) – Elon Musk is in talks with large investment firms and high net-worth individuals about taking on more financing for his $44 billion acquisition of Twitter Inc and tying up less of his wealth in the deal, people familiar with the matter said.
The banks that agreed last month to provide $13 billion in loans secured against Twitter balked at providing more debt for Musk’s acquisition given the San Francisco-based company’s limited cash flow, Reuters reported last month. Musk committed to providing $21 billion in cash for the deal.
Musk could use the new financing to reduce his contribution to the equity check for the deal, the sources said.
Musk has also pledged some of this Tesla Inc shares to banks to arrange a $12.5 billion margin loan to help fund the deal. He may seek to trim the size of the margin loan based on the new investor interest in the deal financing, one of the sources said.
Major investors such as private equity firms, hedge funds and high net-worth individuals, are in talks with Musk about providing preferred equity financing for the acquisition, the sources said. Preferred equity would pay a fixed dividend from Twitter, in the same way that a bond or a loan pays regular interest, but would appreciate in line with the equity value of the company.
Apollo Global Management Inc and Ares Management Corp are among the private equity firms that have been in talks about providing the financing, the sources added.
Musk is still deciding whether he will share some his equity check for the deal with potential partners, according to the sources. Musk is not seeking to take on more debt for the Twitter deal currently, the sources added.
Musk has also started conversations with some of Twitter’s major investors about the possibility of them rolling their stake into the deal rather than cashing out, one of the sources said. Former Twitter chief executive and current board member Jack Dorsey is examining whether he will roll his take, the source added.
The sources requested anonymity because the matter is confidential. Musk, Dorsey, Apollo and Ares did not immediately respond to requests for comment.
Musk revealed last week he sold $8.5 billion in Tesla’s shares. He did not disclose the reason for the move, but investors widely interpreted it as carving out cash for the Twitter deal.
Musk’s conversations with the private equity firms are another indication he is pressing on with the acquisition after he signed an agreement to buy Twitter on April 25.
(Reporting by Chibuike Oguh in Los Angeles and Krystal Hu in New York; Editing by Greg Roumeliotis)
