Microsoft buys LinkedIn for US$26.2b in its largest deal

Offer represents 49.5 per cent premium to LinkedIn’s Friday closing price

PUBLISHED : Monday, 13 June, 2016, 10:39pm
UPDATED : Monday, 13 June, 2016, 10:39pm

Microsoft Corp agreed to buy LinkedIn Corp for US$26.2 billion in its biggest-ever deal, combining the software giant’s fast-growing cloud services business with an online network of 433 million professionals.

The offer of US$196 per share represents a premium of 49.5 per cent to LinkedIn’s Friday closing price.

LinkedIn’s shares soared 48 per cent in early New York trading whereas Microsoft shed 4 per cent.

Reid Hoffman, chairman of LinkedIn’s board and the company’s controlling shareholder, said the deal had his full support.

“I have always had a great admiration for LinkedIn,” Microsoft chief executive Satya Nadella said in a video on the company’s website. “I have been talking with Reid and Jeff [Weiner] for a while ... I have been thinking about this for a long time.”

Weiner will remain chief executive of LinkedIn, reporting to Nadella.

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Microsoft planned to speed up monetisation of LinkedIn by growing individual and organisation 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 US$270 per share last year, but a weak forecast earlier this year sent its shares tumbling amid slowing online ad revenue. LinkedIn went public in 2011 at US$45.

“I think, first of all, [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.”

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The deal, which won the unanimous support of both boards, was expected to close this year, the companies said.

Microsoft said it would issue new debt to fund its acquisition.

After the deal, which would require approval from regulators in the United States, the European Union, Canada and Brazil, LinkedIn would become part of Microsoft’s productivity and business processes unit, the companies said.