Twitter, Elliott reach deal for Dorsey to stay CEO

Investors were said to be pushing for the removal of CEO Jack Dorsey

(Reuters) - Twitter Inc on Monday reached an agreement with Elliott Management that lets Jack Dorsey stay as chief executive and adds three new directors a few days after Elliott's plan to push out the social media company's chief became public.

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Elliott's head of U.S. activism, Jesse Cohn, and private equity firm Silver Lake's co-chief executive officer Egon Durban, will join the social media site's board immediately and the company plans to appoint a third new director soon. Silver Lake also will invest $1 billion in Twitter.

The agreement brings together hedge fund Elliott, which owns a $1 billion stake in Twitter, and Silver Lake in an unusual arrangement that lets Dorsey continue to lead the company, for now, and sidestep a potentially nasty proxy contest.

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"While our CEO structure is unique, so is Jack and so is this company," Twitter's lead independent director Patrick Pichette said in a statement.

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TWTRTWITTER INC.40.15+0.80+2.03%

Twitter shares were up about 0.4% on a day of heavy selling on Wall Street.

In reaching the agreement, Elliott keeps a close eye on Dorsey while also giving the company more time to formulate long-term plans and repair missteps, people familiar with Elliott's thinking said.

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They added that the deal avoids a mad scramble to find an immediate replacement for Dorsey.

Dorsey in 2018. (AP Photo/Jose Luis Magana, File)

Twitter said it would use the Silver Lake investment to help fund a $2 billion share repurchase program.

Twitter also pledged to grow daily users by 20% or more in 2020 and beyond, roughly in line with user growth in its most recent quarter and its projections that costs and expenses would increase 20% this year.

The board will also create a temporary committee to evaluate Twitter's leadership structure and CEO succession plan that will share the results publicly before the end of the year.

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Late last month Elliott nominated four directors to Twitter's board and was pushing to remove Dorsey, criticizing him for being the CEO of two publicly traded companies: Twitter and Square, a financial services company.

Each company, Elliott and other investors argued, deserves a full-time CEO.

Investors had also expressed concern about Dorsey's plan to spend time living in Africa this year, something he walked last week amid growing fears about the virus.

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"We invested in Twitter because we see a significant opportunity for value creation at the company," Elliott's Cohn said, adding "I am looking forward to working with Jack and the board to help contribute to realizing Twitter's full potential."

2020 promises to be a big year for Twitter with people looking to the company for news about the coronavirus, the U.S. election and the planned Olympics in Tokyo.

Silver Lake sent its first tweet ever to announce the news, saying "Silver Lake is excited to partner with Twitter by investing and joining the board and we look forward to working alongside Jack and the whole team."

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Twitter is one of the few U.S. technology companies headed, but not controlled, by one of its founders. It has given shareholders equal voting rights, making Dorsey, who owns only about 2% of the company, vulnerable to a challenge from an activist investor such as Elliott.

Dorsey, 43, is one of Silicon Valley's most prominent entrepreneurs, and also runs Square Inc, a mobile payments company he co-founded.

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(Reporting by Svea Herbst-Bayliss in Boston, Supantha Mukherjee in Bengaluru and Joshua Franklin in New York; editing by Peter Henderson, Saumyadeb Chakrabarty and Nick Zieminski)