We did not see that coming. Microsoft has signaled in the most unambiguous manner that it intends to remain in the very top tier of the technology sector, with a stunning strike on LinkedIn, stating its intention to buy the company for $US26 billion.
LinkedIn shares surged 47 per cent on the news.
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Unlike so many of the companies from its heyday that have gone gentle into that good night — think Compaq, Digital, Lotus, and maybe eventually IBM — Microsoft is buying its way back into a marketplace until now dominated by Google and Facebook.
More importantly, it will own the most lucrative online consumer market in the world — wealthy, white collar, and global.
A decade ago, Microsoft was telling anyone who would listen it intended to generate most of its revenues from advertising in the future. Bing, its search engine, failed to deliver.
Now it has come back for a second, extraordinary bite.
In addition to LinkedIn’s display and recruitment revenues Microsoft also gets two more gems. First there is the treasure trove of data generated by LinkedIn’s 433 million users. Just as importantly, there is the platform those users engage with. Microsoft has the opportunity to integrate its business applications into the platform and create a business where customers can purchase productivity apps from within the LinkedIn ecosystem.
There is a win for developers as well. LinkedIn, as anyone who as ever tried to work with its APIs or cut a deal slightly outside the box will understand, is genuinely appalling at managing and cultivating partners. Microsoft on the other hand has made an art form of creating value from working with independent software developers (ISVs).
Under the terms of the deal, the companies have entered into a definitive agreement under which Microsoft will acquire LinkedIn for $US196 per share in an all-cash transaction valued at $US26.2 billion, inclusive of LinkedIn’s net cash. LinkedIn will retain its distinct brand, culture and independence.
According to a company statement, Jeff Weiner will remain CEO of LinkedIn, reporting to Satya Nadella, CEO of Microsoft. Reid Hoffman, Chairman of the Board, co-founder and controlling shareholder of LinkedIn, and Weiner both fully support this transaction. The transaction is expected to close this calendar year.
“The transaction has been unanimously approved by the Boards of Directors of both LinkedIn and Microsoft. The deal is expected to close this calendar year and is subject to approval by LinkedIn’s shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.”
“Today is a re-founding moment for LinkedIn. I see incredible opportunity for our members and customers and look forward to supporting this new and combined business,” said LinkedIn founder Reid Hoffman. “I fully support this transaction and the Board’s decision to pursue it, and will vote my shares in accordance with their recommendation on it.”
Morgan Stanley is acting as exclusive financial advisor to Microsoft, and Simpson Thacher & Bartlett LLP is acting as legal advisor to Microsoft. Qatalyst Partners and Allen & Company LLC are acting as financial advisors to LinkedIn, while Wilson Sonsini Goodrich & Rosati, Professional Corporation, is acting as legal advisor.