The New York Times reporter, Nick Bilton, has broken the news that micro-blogging startup Twitter offered $525 million in cash and stock to acquire Instagram. The photo sharing social network received the buyout offer in March but ended up accepting an offer from Facebook instead. According to the New York Times, Mark Zuckerberg and company struck a deal with Instagram for $1 billion only three weeks after Twitter made their initial offer.
The high stakes world of venture capital and technology startups have thousands of stories about million dollar deals that almost happened but fell apart at the last minute. However, this Twitter offer may land Instagram CEO Kevin Systrom in some hot water with the law.
Systrom testified in front of the California Corporations Department this past August about the offer from Facebook so that the approval of the deal could be sped up. During the August hearings the Instagram founder was asked about a number of issues including whether he had received any other buy offers. He replied that, “We never received any formal offers or term sheets.”
According to Bilton, the Instagram CEO made a verbal agreement to the $525 million offer from Twitter but eventually back tracked. At the time he ended up refusing the offer stating that he wanted to keep Instagram independent. The New York Times article also states that Systrom got a term sheet from Twitter, or an outline of a formal deal. Interestingly he did not keep the term sheet after he was presented with it.
Bilton reports that Systrom was a member of the Mergers and Acquisitions team at Google and therefore knew how to play the game so he as to keep himself safe when interacting with Twitter. Bilton claims that the Instagram CEO always chose a neutral venue for meetings instead of the Twitter or Instagram offices. It is also stated in the NYT article that Twitter presented Systrom a term sheet which he looked over and memorized before returning it to the micro blogging site.
The California Corporations Department will be deciding if they feel that the information warrants any action. For now they have stated that, “[we have] not received any complaints or protests of our original fairness hearing proceedings in the Facebook/Instagram acquisition.”
Source: Business Insider
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