Facebook (NASDAQ:FB) inked a deal late Wednesday to buy popular texting service WhatsApp in a colossal cash- and stock-deal valued at $19 billion.
The purchase price includes $4 billion in cash, roughly $12 billion worth of Facebook shares as well as an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees to vest four year after the deal closes.
Shares of Facebook fell 4.75% after hours to $64.70.
The massive deal allows Mark Zuckerberg’s social network to devour a fast-growing cross-platform mobile messaging company that rivals its Facebook Messenger. That includes WhatsApp’s talent, intellectual property and fast-growing user base.
WhatsApp has grown significantly since its launch in 2009 and now has 55 employees. The company, started by former Yahoo (NASDAQ:YHOO) staffers Jan Koum and Brian Acton, now has more than 450 million monthly users, 70% of which are active on a daily basis.
The Mountain View, Calif.-based startup says it is adding users at a rate of more than one million a day and is approaching messaging volume that rivals the entire global volume of telecom SMS.
To give some perspective, this buy makes WhatsApp worth more than Blackstone (NYSE:BX), Harley Davidson (NYSE:HOG), Gap (NYSE:GPS), Under Armour (NYSE:UA) and Sony (NYSE:SNE), and virtually in-line with the value of Macy's (NYSE:M).
"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," Zuckerberg said in a statement.
Facebook says the acquisition will accelerate growth and user engagement, similar to its $1 billion purchase of Instagram in 2012. The social network says it will maintain WhatsApp’s brand and headquarters, and the app will continue to operate separate from Facebook’s existing Messenger. Koum will join Facebook’s board of directors.
The deal is contingent upon certain regulatory approvals. If the deal fails to go through, Facebook will pay WhatsApp a fee of $1 billion in cash and issue to WhatsApp a number of Facebook shares equal to $1 billion based on their price at the termination date.
WhatsApp received financial advice from Morgan Stanley (NYSE:MS).