UPDATED - Facebook Buying WhatsApp - $16B In Cash And Stock
A huge acquisition but one which is important for Facebook to both continue its growth but also continue to gather the valuable data it needs to deliver monetizable services to its customers. The deal is pending regulatory approval and should it not get across the line Facebook will pay WhatsApp $1B in cash and $1B in shares.
On one level this is insane – it’s a significant amount of Facebook’s total valuation, but looked at a macro level it allows Facebook to extend its franchise far beyond its primary site, and also gives it an interesting play into developing markets.
WhatsApp has grown massively since its inception – in the calendar year 2013 its users sent 18 billion messages and received 36 billion in return – a massive number that is fully three times the previous year’s metrics. But massive growth and a defensible position are two different things – WhatsApp had rivals, from Apple AAPL -1.56%, Facebook and, to a lesser extent, Twitter. It also had the lofty ambition (if difficult form a revenue perspective) of not pushing advertising onto its users.
Facebook hasn’t yet commented about what this means for WhatsApp and, more importantly, how they’re leverage those massive numbers to deliver value back to the company. One assumes that CEO Mark Zuckerberg believes WhatsApp has the scale to have created a real degree of stickiness and hence be somewhat insulated from any potential customer revolt that might come from a move towards advertising on the platform. Then again users won’t exactly like their conversations being mined to deliver advertising to their Facebook profiles either.
Editor’s note: See Mark Zuckerberg’s comment here.
This is one of those strategic acquisitions that could go awesomely, or horribly wrong. It’s a big, ballsy move by Facebook and will be watched by the industry, and the financial markets, very closely.
More on this as the story develops….
From the regulatory filing:
On one level this is insane – it’s a significant amount of Facebook’s total valuation, but looked at a macro level it allows Facebook to extend its franchise far beyond its primary site, and also gives it an interesting play into developing markets.
WhatsApp has grown massively since its inception – in the calendar year 2013 its users sent 18 billion messages and received 36 billion in return – a massive number that is fully three times the previous year’s metrics. But massive growth and a defensible position are two different things – WhatsApp had rivals, from Apple AAPL -1.56%, Facebook and, to a lesser extent, Twitter. It also had the lofty ambition (if difficult form a revenue perspective) of not pushing advertising onto its users.
Facebook hasn’t yet commented about what this means for WhatsApp and, more importantly, how they’re leverage those massive numbers to deliver value back to the company. One assumes that CEO Mark Zuckerberg believes WhatsApp has the scale to have created a real degree of stickiness and hence be somewhat insulated from any potential customer revolt that might come from a move towards advertising on the platform. Then again users won’t exactly like their conversations being mined to deliver advertising to their Facebook profiles either.
Editor’s note: See Mark Zuckerberg’s comment here.
This is one of those strategic acquisitions that could go awesomely, or horribly wrong. It’s a big, ballsy move by Facebook and will be watched by the industry, and the financial markets, very closely.
More on this as the story develops….
From the regulatory filing:
On February 19, 2014, Facebook, Inc. (“Parent”) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Rhodium Acquisition Sub II, Inc., a Delaware corporation and wholly owned (in part directly and in part indirectly) subsidiary of Parent (“Acquirer”), Rhodium Merger Sub, Inc., a Delaware corporation, a direct wholly owned subsidiary of Acquirer (“Merger Sub”), WhatsApp Inc., a Delaware corporation (“WhatsApp”), and Fortis Advisors LLC, as the stockholders’ agent.Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into WhatsApp (the “First Merger”), and upon consummation of the First Merger, Merger Sub will cease to exist and WhatsApp will become a wholly owned subsidiary of Acquirer. The surviving corporation of the First Merger will then merge with and into Acquirer, which will continue to exist as a wholly owned (in part directly and in part indirectly) subsidiary of Parent. Upon consummation (the “Closing”) of the transactions contemplated by the Merger Agreement (the “Merger”), all outstanding shares of WhatsApp capital stock and options to purchase WhatsApp capital stock will be cancelled in exchange for an aggregate of 183,865,778 shares of Parent’s Class A common stock (valued at $12 billion based on the average closing price of the six trading days preceding February 18, 2014 of $65.2650 per share (“Specified Price”)) and $4 billion in cash to existing WhatsApp securityholders, subject to certain adjustments such that the cash paid will comprise at least 25% of the aggregate transaction consideration. In addition, upon Closing, Parent will grant 45,966,444 restricted stock units to WhatsApp employees (valued at $3 billion based on the Specified Price).
No comments:
Post a Comment