Facebook will buy WhatsApp, the popular messaging application, for $16 billion. WhatsApp had about 400 million monthly active users back in December and has since grown to more than 450 million monthly active users. Facebook said the total $16 billion includes $4 billion in cash in addition to $12 billion worth of Facebook shares, and another $3 billion in restricted shares. If WhatsApp and its employees stick around for four years, they'll receive an additional $3 billion in stock, making the potential total worth around $19 billion in cash and stock.
The deal is particularly noteworthy because Facebook Messenger is already a competing client – clearly, however, it didn't have as many users as Facebook wanted. "WhatsApp is on a path to connect 1 billion people," Facebook CEO Mark Zuckerberg said of the deal. "The services that reach that milestone are all incredibly valuable. I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."
While WhatsApp's founder Jan Kuom said back in December that he was proud the company didn't have any ads, it seems now that the service may be used as a new potential revenue stream for Facebook. The social network recently started adding ads into Instagram, for example. Kuom said that WhatsApp will remain headquartered in Mountain View, California, while Kuom will join Facebook's board of directors. Facebook said, for the time being, Facebook Messenger and WhatsApp will operate separately.
Facebook to Acquire WhatsApp
- Acquisition accelerates Facebook's ability to bring connectivity and utility to the world
- Leading mobile messaging company will continue to operate independently and retain its brand
- WhatsApp co-founder and CEO Jan Koum to join Facebook Board of Directors
MENLO PARK, CALIF. – February 19, 2014 – Facebook today announced that it has reached a definitive agreement to acquire WhatsApp, a rapidly growing cross-platform mobile messaging company, for a total of approximately $16 billion, including $4 billion in cash and approximately $12 billion worth of Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp's founders and employees that will vest over four years subsequent to closing.
WhatsApp has built a leading and rapidly growing real-time mobile messaging service, with:
- Over 450 million people using the service each month;
- 70% of those people active on a given day;
- Messaging volume approaching the entire global telecom SMS volume; and
- Continued strong growth, currently adding more than 1 million new registered users per day.
The acquisition supports Facebook and WhatsApp's shared mission to bring more connectivity and utility to the world by delivering core internet services efficiently and affordably. The combination will help accelerate growth and user engagement across both companies.
"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO. "I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."
Jan Koum, WhatsApp co-founder and CEO, said, "WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We're excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world."
Facebook fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook's expertise, resources and scale. This approach is working well with Instagram, and WhatsApp will operate in this manner. WhatsApp's brand will be maintained; its headquarters will remain in Mountain View, CA; Jan Koum will join Facebook's Board of Directors; and WhatsApp's core messaging product and Facebook's existing Messenger app will continue to operate as standalone applications.
Upon closing of the deal, all outstanding shares of WhatsApp capital stock and options to purchase WhatsApp capital stock will be cancelled in exchange for $4 billion in cash and 183,865,778 shares of Facebook Class A common stock (worth $12 billion based on the average closing price of the six trading days preceding February 18, 2014 of $65.2650 per share). In addition, upon closing, Facebook will grant 45,966,444 restricted stock units to WhatsApp employees (worth $3 billion based on the average closing price of the six trading days preceding February 18, 2014 of $65.2650 per share). As of February 17, 2014, Facebook had 2,551,654,996 Class A and B shares outstanding plus approximately 139 million dilutive securities primarily consisting of unvested RSUs. The Class A common stock and RSUs issued to WhatsApp shareholders and employees upon closing will represent 7.9% of Facebook shares based on current shares and RSUs outstanding.
In the event of termination of the Merger Agreement under certain circumstances principally related to a failure to obtain required regulatory approvals, the Merger Agreement provides for Facebook to pay WhatsApp a fee of $1 billion in cash and to issue to WhatsApp a number of shares of Facebook's Class A common stock equal to $1 billion based on the average closing price of the ten trading days preceding such termination date.
Facebook was advised by Allen & Company LLC and Weil, Gotshal & Manges LLP; and WhatsApp was advised by Morgan Stanley and Fenwick & West, LLP.