In one of the biggest tech mergers of all time, Microsoft said Monday that it’s buying LinkedIn in a deal valued at $26.2 billion.
It’s not coming cheap.
Microsoft is paying $196 per share. That’s 50% more than LinkedIn stock’s closing price at the end of the day on Friday.
On Monday, following the announcement, LinkedIn stock soared to near that purchase price, while shares of Microsoft slipped 4%.
The deal combines Microsoft, which dominates the global market for computer systems, with LinkedIn, known as the main social network for professionals.
LinkedIn had a long, multi-year run as the best-performing social network in the stock market. But over the past six months, shares have started to sink as Facebook has soared.
But it’s a sizable business. LinkedIn had $3 billion in revenue last year, up 35% from the year before. It has 433 million members worldwide.
But its shares had plunged 42% so far this year, before the deal was announced. The big spark came in February when the company warned of disappointing revenue and profits ahead.
The stock had previously traded at a very high price, relative to how much it was expected to earn. Why? Investors assumed that growth would continue at a break-neck pace, and the more dour growth forecast sent shares plunging.
The LinkedIn brand will continue after the deal is closed later this year, the companies said. Jeff Weiner will remain CEO of LinkedIn, reporting to Microsoft CEO Satya Nadella.
“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Nadella said. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365.”
This is set to be the 5th largest tech deal ever. It is dwarfed by the $67 billion purchase of EMC by Dell announced last year, which has yet to close.
At the same time, the Microsoft deal values LinkedIn at significantly more than Yahoo, which is weighing bids believed to priced the company’s core business at less than $10 billion.
Reid Hoffman, the cofounder and chairman of LinkedIn who is also the company’s controlling shareholder, will get $2.9 billion for the sale of his shares. The jump in LinkedIn shares early Monday lifted his net worth by more than $900 million.
