Facebook Inc will buy fast-growing mobile-messaging startup WhatsApp for $19-billion in cash and stock, as the world’s largest social network looks for ways to boost its popularity, especially among a younger crowd.
Facebook said on Wednesday it will pay $4 billion in cash and the rest in stock and restricted stock units to be granted to WhatsApp’s founders and employees over four years in its single largest acquisition, dwarfing the $1-billion it paid for photo-sharing app Instagram.
“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” Mark Zuckerberg, Facebook’s founder and chief executive, said in a statement. “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,” he added referring to Jan Koum, WhatsApp co-founder and chief executive
WhatsApp has more than 450 million monthly users, with 70 percent of those active on a given day.
“WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide,” Koum said. “We’re excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world.”
Shares in Facebook slid 5 per cent to $64.70 (U.S.) after hours, from a close of $68.06 on the Nasdaq.
As part of the deal, WKoum will join Facebook’s board, and the social network will grant an additional $3 billion worth of restricted stock units to WhatsApp’s founders, including Koum.
Also, Facebook promised to keep the WhatsApp brand and service, and pledged a $1 billion cash break-up fee were the deal to fall through.
Facebook was advised by Allen & Co, while WhatsApp has enlisted Morgan Stanley for the deal.
With files from The New York Times