Facebook acquisition: WhatsApp to get $2 bn if deal fails

Written by PTI | New York | Updated: Feb 22 2014, 15:44pm hrs
FacebookFacebook also expects a decline in number of users logging on the social networking website through PCs globally. Reuters
Social networking giant Facebook will have to shell out USD 2 billion (over Rs 12,500 crore) if its acquisition of the instant messaging service Whatsapp fails to get necessary approvals.

The California-based Facebook has inked a deal to acquire WhatsApp, its largest acquisition ever, for USD 19 billion (USD 4 billion in cash, USD 12 billion in Facebook shares and another USD 3 billion in restricted stock). It is expected to close in the current calendar year.

"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," Facebook said.

The Menlo Park-headquartered firm will also issue a number of shares of its Class A common stock equal to USD 1 billion to WhatsApp, it added.

Whataspp has 450 million monthly active users and growing by more than one million registered users per day.

According to a presentation, Whatsapp's monthly active user base tops even that of Facebook (145 million), Gmail (123 million), Twitter (54 million) and Skype (52 million). Its messaging volume is approaching the entire global telecom SMS volume.

One the largest IT deals in recent times, Facebook's announcement dwarfs Microsoft's USD 7.2 billion acquisition of Nokia's phone business (and Skype for USD 8.5 billion in 2011), Fairfax consortium's bid to take BlackBerry private for USD 4.7 billion (which didn't go through) and Google shedding Motorola in USD 2.9 billion deal with Lenovo.

Reports suggest that this could probably be the largest Internet deal since Time Warner's USD 124 billion merger with AOL in 2001.

Facebook has been aggressively ramping up its apps portfolio to beef up its mobile offering as it expects more users to log onto its portal through smart handhelds.

In 2012, Facebook bought photo-sharing service Instagram for about USD 700 million, while last year its bid to take over Snapchat for USD 3 billion failed.

Facebook also expects a decline in number of users logging on the social networking website through PCs globally, especially from the US and other developed markets of Europe and Asia.

It has projected that future growth will come from mobile as more and more users in emerging markets (which it calls 'key source' of growth), especially India, log on through their handheld devices.

Facebook's daily active users (DAUs) rose by 22 per cent to 757 million during December 2013 from 618 million in the year-ago period helped by growth in major markets including Brazil, India and the US.

On the other hand, global mobile DAUs rose 49 per cent to 556 million on average during December 2013 from 374 million during December 2012.