What’s On

WhatsApp acquisition takes Facebook’s multi-app mobile strategy a notch up

Highlights
  • Facebook has reached a definitive agreement to acquire WhatsApp, for a total of approximately USD 16 billion, including USD 4 billion in cash and approximately USD 12 billion worth of Facebook shares. The agreement also provides for an additional USD 3 billion in restricted stock units
  • Pushing forward the multi-app play: At present FB engages users with its messenger app, Instagram, FB Paper in addition to its mainstream app. Following this acquisition, WhatsApp is added to the mix
  • WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable: Mark Zuckerberg
  • We're excited and honoured to partner with Mark and Facebook as we continue to bring our product to more people around the world: Jan Koum
  • WhatsApp’s brand will be maintained; Its core messaging product & FB's existing Messenger app will continue to operate as standalone applications

Facebook has reached a definitive agreement to acquire WhatsApp, a cross-platform mobile messaging company, for a total of approximately USD 16 billion, including USD 4 billion in cash and approximately USD 12 billion worth of Facebook shares. The agreement also provides for an additional USD 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 rapidly growing real-time mobile messaging service, with over 450 million people using the service each month. Nearly 70 per cent of those people active on a given day and messaging volume approaching the entire global telecom SMS volume in addition to a continued growth, adding more than 1 million new registered users per day.

The Multi-App Strategy
While a Facebook statement quotes that acquisition supports Facebook and WhatsApp’s shared mission to bring more connectivity and utility by delivering core internet services efficiently and affordably, it is evident that Facebook’s mobile strategy has just become stronger. In the current scenario, FB engages users with its messenger app, Instagram, the recently launched FB Paper in addition to its mainstream app. Following this acquisition, WhatsApp would be an additional mode of FB’s ways to connect with, and engage, people.

“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,” said Mark Zuckerberg, Facebook founder and CEO.

Jan Koum, WhatsApp’s Co-founder and CEO added, “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.”

WhatsApp to operate as an independent, like Instagram
Facebook’s philosophy to enable 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, would apply to WhatsApp as well. This approach is working well with Instagram. 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.

A statement from FB informed: “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 USD 4 billion in cash and 183,865,778 shares of Facebook Class A common stock (worth USD 12 billion based on the average closing price of the six trading days preceding February 18, 2014 of USD 65.2650 per share). In addition, upon closing, Facebook will grant 45,966,444 restricted stock units to WhatsApp employees (worth USD 3 billion based on the average closing price of the six trading days preceding February 18, 2014 of USD 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 per cent 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 USD 1 billion in cash and to issue to WhatsApp a number of shares of Facebook’s Class A common stock equal to USD 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.

Noor Fathima Warsia

A veteran journalist in the Indian marketing, media and advertising fraternity, Noor Fathima Warsia took on the role of Group Editor -– APAC for Digital Market Asia in May 2013. Noor has focussed on tracking trends and developments in the Indian media industry.
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