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UPDATE: Facebook Announces $16B Cash & Stock Merger With WhatsApp

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UPDATE: Facebook Announces $16B Cash & Stock Merger With WhatsApp

As the war to acquire talent, users and growth rages on in Silicon Valley, Facebook (NASDAQ: FB) announced its latest salvo with the $16 billion dollar acquisition of WhatsApp. The news was broken in an SEC Form 8-K filed after the close Wednesday.

The deal, which will lead WhatsApp to become a wholly-owned subsidiary of Facebook, calls for the exchange of WhatsApp shares for $12 billion in Facebook stock and $4 billion in cash.

It was also announced that over 45 million shares in restricted stock units were to be granted to WhatsApp employees, which is valued at approximately $3 billion, and would bring the total consideration of Facebook shares being issued upon closing of the deal to approximately 7.9 percent of those currently outstanding.

WhatsApp, a mobile messaging service that allows users to send free texts, videos, photos, and even audio messages, boasted 430 million users as of January 21, according to company CEO Jan Koum, which would constitute a doubling of its user base in under one year.

For some perspective on the deal, Twitter (NASDAQ: TWTR) is currently valued at just over $20 billion which has 243 million active users, while Pandora (NYSE: P) which is valued at a little over $7.3 billion sports roughly 73 million active users.

Tumblr on the other hand, which was acquired by Yahoo! (NASDAQ: YHOO) for $1.1 billion while boasting over 216 million monthly visitors.

Looking at the deal on a cost per user basis, Facebook will pay roughly $40 per user, which what Microsoft (NASDAQ: MSFT) paid for Hotmail back in 1998.

The deal becomes even more interesting when put in perspective with Facebook's rejected offer for social media craze SnapChat, which was rumored to have come in around $3 billion, and would gain Facebook access to 26 million active users in the US.

WhatsApp is a free application to download, only requiring users to pay after their first year of use, at which point it becomes $0.99. A TechCrunch article reported that the company plans to remain ad-free, and will continue asking users to pay for its service as it has in the past.

In the same article, TechCrunch reported that the company has remained very lean, sticking to a team of 50 people, 25 of which are engineers, with another 20 focusing on multilingual support.

The monumental deal is allowed to be terminated by either party if it does not close before August 19, 2014, in which case WhatsApp would be penalized and required to pay Facebook $1 billion in cash.

Following the news, Facebook shares traded with significant volatility, falling as low as $64.18 before rallying back, settling on a decline of 2.22 percent to $66.58.

Original story was posted here.

Posted-In: Jan Koum SnapChat TumblrM&A News Hot Movers Tech Best of Benzinga

 

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Benzinga's M&A Chatter for Wednesday February 19, 2014

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