Facebook has finally completed its biggest deal ever after gaining approval from European regulators. This mega deal was initially priced at $19 billion but its share price has risen since then. There was some fierce opposition to the deal in the European telecoms industry and that hurdle has now been crossed. This acquisition of Whatsapp by Facebook for $22 billion was completed in cash and stock. It will pay $4.59 billion in cash and 177,60,669 shares in the company.
Whatsapp a company founded in 2009 has a global presence of 600 million users on its messaging app. It has 450 million monthly active users and has 19 billion messages sent everyday on its app. Whatsapp founders Jan Koum and Brian Acton now billionaires will pocket $6.8 billion and $3.5 billion respectively after taxes. Both the founders of Whatsapp were rejected by Facebook in the past when they had applied for jobs at the company. Instead they created Whatsapp and are now billionaires. Koum who was on food stamps at one point in his life also gets a seat on board of Facebook and will get the same salary as the CEO, Mark Zuckerberg of $1.
Facebook announced that it will keep Whatsapp as a separate service like how it did with Instagram when it purchased it for $1 billion . It has also tried to acquire Snapchat but their offer of $3 billion was rejected. has expressed considerable interest. Earlier this year it hired Paypal’s CEO David Marcus to head its messaging products division. This is an indication that it is gearing up for increasing its revenues by adding some kind of exchange of money between its users and its messaging service.
Completing this acquisition of Whatsapp for $22 billion by Facebook has been no easy task. Even after been cleared by the Federal Trade Commission in the US it had to file an application with the European Commission for an antitrust review. After the formal application was made by Facebook, the European Commission mailed out a 60 page questionnaire to probe more in the matter. The questionnaire was sent to carriers, other messaging app makers and also potential customers. European Union wanted to make sure that the merger did not infringe upon three key areas of competition in the digital sphere like consumer communication services, social networking services and online advertising services.
Fortunately for both the companies, the European Commission has cleared the pathway for this merger. European Commission cleared the deal on grounds that the companies are not close competitors. On communication services, Whatsapp is used only on smartphones in contrast to the others popular messenger app. On social networking services, Facebook offers a richer experience. On online advertising, even if Whatsapp started online advertising, it would not raise any competitor concerns.
This deal could potentially attract more users to Facebook. As it strengthens their messaging service and their mobile platform. This merger of the two companies is also quite a contrast on their revenues. Whatsapp revenues are $20 million whereas Facebook are close to $8 billion. The former was advised by Morgan Stanley and the latter by Allen & Co. The completion of this deal of acquiring Whatsapp for $22 billion by Facebook is one of the largest since the merger of Time Warner and Aol for $164 billion.
By Sumit Nigam