Social media giant Facebook has announced it is purchasing instant messaging app WhatsApp in a deal worth a staggering $US16 billion.
The social media mega-deal will see WhatApp investors gain $US12 billion in Facebook stock and $US4 billion in cash, with a further $US3 billion in restricted Facebook stock to WhatsApp’s founders and employees that will vest over the next four years.
The takeover will see WhatsApp shareholders owning 7.9% of the total stock in Facebook once the deal is completed, based on current share prices.
WhatsApp investors are winners even if the deal falls through, including from a failure to gain regulatory approvals, with Facebook promising $US1 billion in cash and a further $US1 billion in its Facebook Class A stock if there’s an early termination of the agreement.
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The instant messaging service has a user base of 450 million unique users each month, with 70% of its users active on any given day, and a growth rate of around 1 million new users per day.
Under the deal, WhatsApp will continue to exist as a wholly owned subsidiary of Facebook with a separate headquarters, while co-founder and chief executive Jan Koum will join Facebook’s board of directors.
Meanwhile, for end users, WhatsApp will continue to exist as a standalone app separate to Facebook Messenger.
In a statement, Facebook’s founder and chief executive, Mark Zuckerberg, says the deal 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. 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
WhatsApp co-founder and chief executive Jan Koum was excited by the opportunity.
“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 honoured to partner with Mark and Facebook as we continue to bring our product to more people around the world.”
The latest deal overshadows the $US1 billion Facebook paid for Instagram in April 2012.