Facebook buys WhatsApp for $19 billion

Facebook, the world’s largest social network, agreed to purchase mobile-messaging startup WhatsApp for as much as $19 billion in cash and stock, the biggest Internet acquisition in more than a decade.

The accord includes $12 billion in stock, $4 billion in cash and $3 billion in restricted shares, Facebook said yesterday in a statement. It’s the largest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, according to data compiled by Bloomberg. WhatsApp has more than 450 million members, with 1 million users being added daily.

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Facebook Chief Executive Officer Mark Zuckerberg, who bought photo-sharing service Instagram for about $700 million in 2012, has been adding applications such as messaging and news to court smartphone and tablet users. WhatsApp, which would be the company’s biggest acquisition, competes with apps from Twitter, Kik Interactive, and Snapchat, the photo-message startup that rebuffed a $3 billion Facebook bid last year.

“They seem to have made a pretty strong statement with this acquisition,” said Debra Aho Williamson, an analyst at EMarketer Inc. “Facebook has come to the realization that it needs a portfolio of apps to reach people with different use cases, different demographics, or different ways of communicating.”

The deal prices WhatsApp at more than half the $31.5 billion market value of microblogging service Twitter, which has 241 million active users. The shares of Menlo Park, California- based Facebook fell as much as 5.7 percent to $64.18 in extended trading after the acquisition was announced. They rose 1.1 percent to $68.06 at the close in New York.

“Facebook is clearly taking out one of its main competitors,” Paul Sweeney, a Bloomberg Industries analyst, said in an e-mail. “They are buying 450 million loyal users and an extraordinary growth story, but at a staggering cost.”

Mountain View, California-based WhatsApp, which is popular in Europe, lets users send messages through its service on mobile devices based on different operating systems including Apple Inc.’s iOS, Google Inc.’s Android, Microsoft Corp.’s Windows Phone and BlackBerry Ltd.’s software.

Unlike traditional text messages, which consumers pay for through their mobile-phone plans, WhatsApp is free for the first year, and costs 99 cents a year after that. It also competes with Tencent Holdings Ltd.’s WeChat in China, KakaoTalk in Korea and Line in Japan, as well as Facebook’s own application, Facebook Messenger.

BlackBerry, which owns a WhatsApp rival called BlackBerry Messenger, rose after Facebook’s announcement. The smartphone maker climbed as much as 9 percent to $9.82 in late trading.

Tencent fell as much as 3.4 percent in Hong Kong trading, the biggest intraday drop in more than two weeks.

Rakuten Inc., the Japanese online retailer controlled by billionaire Hiroshi Mikitani, last week agreed to buy the Viber instant-messaging and calling service for $900 million. At that price, Rakuten is paying $3 for each of Viber’s 300 million users, while Facebook is paying as much as $42 for each of WhatsApp’s.

“They just took out their primary threat and they recognize that overnight it makes them the leader in the mobile messaging space,” said Jim Patterson, CEO of San Francisco- based Cotap Inc., a messaging service for businesses. “It was clearly the first mobile app other than Facebook that was going to get to 1 billion users.”

Jan Koum, WhatsApp’s 38-year-old CEO, co-founded the company with Brian Acton, 42, in 2009 after almost a decade as an engineer at Yahoo! Inc. Venture capital firm Sequoia Capital invested $8 million in WhatsApp in 2011, for a more than 15 percent stake that is now worth about $3.5 billion, according to people with knowledge of the deal.

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