Written by Staff Writer
14 Jun, 2016 | 6:59 am
Microsoft announced that it’s buying professional networking website LinkedIn in its biggest-ever deal for just over $26bn (£18bn) in cash.
The software giant will pay $196 a share – a premium of almost 50% to Friday’s closing share price, but was still well below the social media company’s all-time high of $270.
By connecting widely used software like Microsoft Word and PowerPoint with LinkedIn’s network of 433 million professionals, the combination could enable Microsoft to add a suite of sales, marketing and recruiting services to its core business products and potentially challenge cloud software rivals.
The deal may also help spur further mergers and acquisitions in the tech sector, where a broad correction is bringing down the prices of public and private companies even as a handful of major players sit on large cash piles.
But this deal is about more than money, it is meant as a powerful signal of where Satya Nadella is now taking Microsoft. He sees its future as a cloud computing business providing all sorts of professional services to clients – including a social network to connect them to each other.
LinkedIn shares soared 47%, or $61.50, to $192.60 in New York following the announcement of the deal. Shares in Microsoft fell 2.6% to $50.16, bringing the decline this year to almost 10%.
Jeff Weiner will remain chief executive, reporting to Mr Nadella.
The takeover is by far the biggest acquisition made by Microsoft, which paid $8.5bn for Skype in 2011 and bought Nokia’s mobile phone business for $7.2bn in 2013. The LinkedIn acquisition also eclipses the $19bn that Facebook paid for WhatsApp in 2014.
Despite having a cash pile of about $92bn, Microsoft said it would pay for LinkedIn mostly by issuing new debt.
It expects the deal, which must be approved by regulators in the US, EU, Canada and Brazil, to generate annual savings of $150m by 2018.
Reid Hoffman, 48, hatched the idea for LinkedIn from his apartment in December 2002 – shortly after eBay bought online payment service PayPal, where he was CEO.
LinkedIn lets people post a professional profile and establish business contacts. Most users do not pay for the service but the company earns revenue by charging premium subscriptions to recruiters and businesses.
Last year, LinkedIn’s revenues were almost $3bn but it recorded a net loss of $166m.
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