Facebook Inc will buy mobile-messaging startup WhatsApp for $19 billion in cash and stock, The messaging service with more than 450 million users around the world is a leading mobile app.
Combining text messaging and social networking, messaging apps provide a quick way for smartphone users to trade everything from brief texts to flirtatious pictures to YouTube clips – bypassing the need to pay wireless carriers for messaging services.
WhatsApp is adding about a million users per day, Facebook co-founder and chief executive officer Mark Zuckerberg said on his page on Wednesday.
“WhatsApp will complement our existing chat and messaging services to provide new tools for our community,” he wrote on his Facebook page. “Since WhatsApp and (Facebook) Messenger serve such different and important users, we will continue investing in both.”
Smartphone-based messaging apps are now sweeping across North America, Asia and Europe.
Even so, he balked at the price tag. As part of the deal, WhatsApp co-founder and chief executive officer Jan Koum 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. That is on top of the $16 billion in cash and stock that Facebook will pay. “Goodness gracious, it’s a good deal for WhatsApp,” Teo said.
Shares in Facebook slid 5 percent to $64.70 after hours, from a close of $68.06 on the Nasdaq.
Facebook said on Wednesday it will pay $4 billion in cash and about $12 billion in stock in its single largest acquisition, dwarfing the $1 billion it paid for photo-sharing app Instagram.
The price paid for Instagram, which with just 30 million users was already considered overvalued by many observers at the time.
Facebook promised to keep the WhatsApp brand and service, and pledged a $1 billion cash break-up fee if the deal falls through.
Facebook was advised by Allen & Co, while WhatsApp has enlisted Morgan Stanley for the deal.