Business-oriented social network site
hails deal as ‘a chance to change how the
world works’
hails deal as ‘a chance to change how the
world works’
More news Topics LinkedIn Microsoft
Computing
Technology sector
Mergers, acquisitions and funding
Mergers and acquisitions
Computing
Technology sector
Mergers, acquisitions and funding
Mergers and acquisitions
Microsoft is buying the business-focused
social network LinkedIn for $26.2bn
(£18.5bn) in cash, its biggest ever
purchase, the two companies announced
on Monday.
The agreed deal – at $196 per LinkedIn
share – was announced by both
companies before the market opened on
Wall Street. LinkedIn’s shares soared
49% on the news while Microsoft’s
dipped close to 3%.
Microsoft said that after the acquisition,
LinkedIn will “retain its distinct brand,
culture and independence”. Jeff Weiner,
LinkedIn’s chief executive, said the deal
“gives us a chance to change the way the
world works”.
LinkedIn has 430 million members,
which means the deal values each
member at more than $60. The network
was founded in 2002 and floated in New
York in 2011 with a value of $4.25bn.
The acquisition comes as LinkedIn has
struggled. In February this year, its
shares plunged 43% on the New York
Stock Exchange, after the business
network forecast much weaker than
expected growth in 2016. The price
collapse wiped $11bn off the value of
LinkedIn in a single day, which left its
share price down at a three-year low of
$101.
If the deal with Microsoft goes through
as planned, Jeff Weiner, who joined
LinkedIn in 2008 as the company’s
president before becoming chief
executive later that year, will stay on in
his current role, reporting directly to
Microsoft boss Satya Nadella.
In a statement, Nadella hinted at the
competitive advantage he expects the
network to provide for Microsoft. He said
LinkedIn would pair well with the
company’s business-focused software
such as Office and customer relationship
manager Dynamics.
“The LinkedIn team has grown a
fantastic business centered on connecting
the world’s professionals,” he said.
“Together we can accelerate the growth
of LinkedIn, as well as Microsoft Office
365 and Dynamics as we seek to
empower every person and organisation
on the planet.”
Reid Hoffman, LinkedIn’s co-founder and
controlling shareholder, described the
deal as “a re-founding moment” for the
company. Weiner added that the
“relationship with Microsoft, and the
combination of their cloud and
LinkedIn’s network … gives us a chance
to change the way the world works.”
The deal, which has already been
approved by the two companies’ boards,
is expected to be completed by the end
of this year.
After the deal was announced on
Monday, LinkedIn was valued at
$24.68bn (£17.34bn). Hoffman’s share -
about 10.9% of the company outstanding
shares - was worth more than $2.69bn
(£1.89bn).
Even as LinkedIn shares soared on the
announcement, Microsoft shares are
expected to take a bit of a beating in the
near future.
“Shares in Microsoft were
understandably suspended from trading
in the lead-up to this bit of news, given
that the traditional reaction to such an
announcement often involves a
shareholder exodus from the predator,”
pointed out Augustin Eden, research
analyst at Accendo Markets, who
described LinkedIn as “professional
networking/dating/narcissism website”.
“With this deal lightening Microsoft’s
coffers to the tune of $26bn, make that
an exodus of biblical proportions.”
The deal heightened expectations of
more tech mergers to come. “The use of
debt rather than stock will reassure those
that worry this is another sign of a
market top, and will have the added
benefit of raising the prospect of a buyer
for Twitter,” said Chris Beauchamp,
senior market analyst at IG.
Shares in Twitter were up 6% on
Monday, yet even with that boost they
were still worth less than half of what
they were worth a year ago. Executive
turnover and lack of growth has led to
speculations that sale could be
“inevitable”, according to analysts at
SunTrust Robinson Humphrey.
“We want to underscore that we do not
think the company is up for sale in the
near term. However, we believe that if
current trends persist, Twitter would be
a top candidate in 2017,” they wrote last
week.
