Referring to WhatsApp's soaring growth, Facebook CEO Mark Zuckerberg said on a conference call, "No one in the history of the world has done anything like that."
WhatsApp is the most popular messaging app for smartphones, according to OnDevice Research.
Buying WhatsApp will only bolster Facebook's already strong position in the crowded messaging world. Messenger, Facebook's a standalone messaging app for mobile devices, is second only to WhatsApp in its share of the smartphone market.
Similar to traditional text messaging, WhatsApp allows people to connect via their cellphone numbers. But instead of racking up texting fees, WhatsApp sends the actual messages over mobile broadband. That makes WhatsApp particularly cost effective for communicating with people overseas.
That kind of mobile messaging services have become wildly popular, with twice as many messages sent over the mobile Internet than via traditional texts, according to Deloitte. But most of the messaging industry's revenue is still driven by text messaging.
On the conference call, Facebook said it is not looking to drive revenue from WhatsApp in the near term, instead focusing on growth. Zuckerberg said he doesn't anticipate trying to aggressively grow WhatsApp's revenue until the service reaches "billions" of users.
WhatsApp currently charges a dollar a year after giving customers their first year of use for free. WhatsApp CEO Jan Koum said on the conference call that WhatsApp's business model is already successful.
That indicates Facebook bought WhatsApp to add value to its existing messaging services, as well as for the long-term potential of the company.
Facebook bought Instagram for $1 billion in 2012 for similar reasons: As young social network users gravitated towards photo-sharing, Facebook wanted to scoop up what could have eventually become a big rival.
Like Instagram, WhatsApp will function as an autonomous unit within Facebook, with all the existing employees coming in as part of the deal.
Facebook (FB, Fortune 500) said it will pay WhatsApp $4 billion in cash and $12 billion in stock. WhatsApp's founders and staff will be eligible for for another $3 billion in stock grants to be paid out if they remain employed by Facebook for four years. Koum will also join Facebook's board of directors.
Source: http://money.cnn.com/2014/02/19/technology/social/facebook-whatsapp/index.html
Another Source Said: http://www.businessinsider.in/Facebook-Is-Buying-Huge-Messenger-App-Whatsapp-For-16-Billion/articleshow/30697022.cms
Facebook is buying huge messaging app Whatsapp for $12 billion in stock and $4 billion in cash.
Whatsapp has 400 million users.
Here is the press release:
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).
The Merger Agreement contains customary representations, warranties and covenants by Parent and WhatsApp. A portion of the aggregate consideration will be held in escrow to secure the indemnification obligations of the WhatsApp securityholders. The Closing of the Merger is subject to customary closing conditions, including regulatory approvals. The Merger is anticipated to close later in 2014. Upon Closing, Jan Koum, WhatsApp's co-founder and CEO, will become a member of Parent's board of directors. In addition, Parent has agreed to file a Registration Statement on Form S-3 covering the resale of the shares of the Company's Class A common stock to be issued to the stockholders of WhatsApp.
Either Acquirer or WhatsApp may terminate the Merger Agreement if the Closing has not occurred on or before August 19, 2014 (or August 19, 2015 if, as of August 19, 2014, all closing conditions have been completed except for the receipt of certain regulatory approvals). 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 Acquirer to pay or cause to be paid to WhatsApp a fee of $1.0 billion in cash and to issue to WhatsApp a number of shares of Parent's Class A common stock equal to $1.0 billion (based on the average closing price of the ten trading days preceding such termination date).
Parent intends to issue the shares of Class A common stock described herein in reliance upon the exemptions from registration afforded by Section 4(2) and Rule 506 promulgated under the Securities Act of 1933, as amended.
The foregoing summary of the Merger Agreement and the transactions contemplated thereby do not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which will be filed as an exhibit to Parent's Quarterly Report on Form 10-Q for the quarter ending March 31, 2014.
This Current Report on Form 8-K may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including the expected completion of the transactions contemplated by the Merger Agreement and the time frame in which this will occur. Statements regarding future events are based on the parties' current expectations and are necessarily subject to associated risks related to, among other things, regulatory approval of the acquisition of WhatsApp or that other conditions to the Closing may not be satisfied, the potential impact on the business of WhatsApp due to the announcement of the acquisition, the occurrence of any event, change or other.
