*

Transaction is an all-stock deal

*

Deal's $45 billion price tag includes $12 billion in debt

*

xAI valued at $80 billion, integration could make training

Grok

easier

(Recasts and writes through, adds comment from Saudi Arabian

investor Prince Alwaleed bin Talal in paragraphs 6-7)

By Greg Bensinger

March 28 (Reuters) - Elon Musk's xAI has acquired X in a

deal that values the social media platform at $33 billion and

allows the value of his artificial intelligence firm to be

shared with his co-investors in the company formerly known as

Twitter.

The deal could also help xAI's ability to train its chatbot

known as Grok.

"xAI and X's futures are intertwined," Musk, who also heads

automaker Tesla and SpaceX, wrote in a post on X: "Today, we

officially take the step to combine the data, models, compute,

distribution and talent."

He said the combination values "xAI at $80 billion and X at

$33 billion ($45B less $12B debt)".

Representatives for X and xAI did not immediately respond to

requests for comment. Much of the deal's specifics remain

unclear, such as how X's leaders would be integrated in the new

firm or whether there would be regulatory scrutiny.

Musk, the world's wealthiest man, is also a close ally of

U.S. President Donald Trump and heads the Department of

Government Efficiency.

Saudi Arabian investor Prince Alwaleed bin Talal, who owns

the investment company Kingdom Holding, said he had requested

the development.

He noted his companies are the second-largest investors in X

and xAI. "After this deal, the value of our investments is

expected to reach between $4-$5 billion... and the meter is

running," he said in a post on X.

D.A. Davidson analyst Gil Luria said the price tag for X of

$45 billion when debt was included was not a coincidence. "It is

$1 billion higher than the take-private transaction for Twitter

in 2022."

An investor in xAI who declined to be identified said they

were not surprised by the deal, viewing it as Musk consolidating

his leadership and management at his own companies.

Musk did not ask investors for approval but told them that

the two companies had been collaborating closely and the deal

would drive deeper integration with Grok, the investor said.

OPENAI RIVALRY

Musk's xAI startup was launched less than two years ago and

recently raised $10 billion in a funding round that valued the

company at $75 billion, according to a media report.

It competes with the likes of Microsoft-backed OpenAI as

well as with Chinese startup DeepSeek.

In February, Musk, 53, made a $97.4 billion bid with a

consortium for OpenAI, which was rejected and he has sued to

prevent the ChatGPT maker from converting from a non-profit to a

for-profit business. A judge this month denied Musk's request

for a preliminary injunction that would prevent the changeover.

As competition in AI intensifies, xAI has been ramping up

its data center capacity to train more advanced models, and its

supercomputer cluster in Memphis, Tennessee, called "Colossus,"

is touted as the largest in the world.

xAI introduced Grok-3, the latest iteration of its chatbot,

in February.

The X platform could serve to further distribute xAI

products, while also providing a real-time feed of users'

musings, screenshots and other data.

After buying Twitter, Musk gutted the company's workforce,

prompting advertisers to flee the platform and a rapid decline

in revenue. Recently, brands have been returning to X as Musk's

influence in the Trump administration grows.

The seven banks that extended $13 billion in loans to Musk

to buy X kept the debt on their books for two years until they

were able to sell it all at once last month, according to a

source familiar with the transactions.

This was made possible after a surge in investor interest

for exposure to AI companies along with X's improved operating

performance over the previous two quarters, among other factors,

according to two people familiar with the matter.

After the merger, investors who bought the debt from the

banks will profit, said Espen Robak, founder of Pluris Valuation

Advisors, which specializes in illiquid assets. "For sure the

debt is worth more now, if not fully paid off."

Separately, a U.S. judge on Friday rejected a bid by Musk to

dismiss a lawsuit claiming he had defrauded former Twitter

shareholders by waiting too long to disclose his initial

investment in the company.