Microsoft Corp (MSFT.O) will buy LinkedIn Corp (LNKD.N) for $26.2 billion in its
biggest-ever deal, combining the software giant's business-productivity tools
with an online network of 433 million professionals.
For
Microsoft, the deal will help it in it mission of trying to keep services like
Outlook email relevant enough that customers won't want to leave it for
competitors such as Google's Gmail.
For
LinkedIn, the opportunity to tap Microsoft's customers, including the 1.2 billion
users of its Office suite of business software, could help it jumpstart growth,
which has slowed in recent quarters.
"The
professionals of the world can benefit in terms of getting their work
done," said Microsoft Chief Executive Satya Nadella, who has been trying
to reinvigorate the once-lumbering company since taking over in February 2014,
in a phone call.
"The
Venn diagram is pretty big," he said, meaning the overlap of customers of
both companies, although he didn't give a precise number.
He gave
an example of a customer walking into a meeting scheduled on a Microsoft
Outlook calendar integrated with LinkedIn, receiving notification that one of
the people in the meeting went to college with a colleague.
"The
future of productivity is around people, identity and data and the
relationships between the them," said Matt McIllwain, a portfolio manager
at Madrona Ventures. "Microsoft is buying LinkedIn for the opportunity to
leverage these capabilities and combine them with Microsoft's strong but
complimentary assets in those three areas."
The offer of $196 per share represents a premium
of 49.5 percent to LinkedIn's Friday closing price.
LinkedIn's
shares soared 48 percent to $194.00 in early New York Stock Exchange trading
and Microsoft's shares were down 4 percent.
Reid
Hoffman, chairman of LinkedIn's board and the company's controlling
shareholder, said the deal has his full support.
"I
have always had a great admiration for LinkedIn," Microsoft CEO Satya
Nadella said in a video on Microsoft's website. "I have been talking with
Reid and Jeff for a while ... I have been thinking about this for a long
time." (bit.ly/1Pougw6)
Jeff
Weiner will remain chief executive of LinkedIn, reporting to Nadella. In a
phone call, Weiner said LinkedIn would remain its own entity in the way that
YouTube is relatively independent from parent Alphabet (GOOGL.O), or Instagram from parent
Facebook (FB.O).
Microsoft
plans to speed-up monetization of LinkedIn by growing individual and
organization subscriptions as well as targeted advertising, it said.
Despite
the rich premium paid by Microsoft, LinkedIn is selling for well below its peak
of more than $270 per share in 2015, but a weak forecast earlier this year sent
its shares tumbling amid slowing online ad revenue. LinkedIn went public in
2011 at $45.
"(LinkedIn)
is a great business, even though the company stubbed their toe back in
February," said Ivan Feinseth, analyst at Tigress Financial Partners.
"It's a premium company and it deserves a premium valuation."
The
deal, which won the unanimous support of both boards, is expected to close this
year, the companies said.
Microsoft
said it would issue new debt to fund its acquisition.
After
the deal, which will require approval from regulators in the United States, the
EU, Canada and Brazil, LinkedIn will become part of Microsoft's productivity
and business processes unit, the companies said.
Representative Image
Source: Reuters
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