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Microsoft Buying LinkedIn For $26.2 Billion Cash In Its Biggest Acquisition To Date

This article is more than 7 years old.

Microsoft is spending $26.2 billion in cash to expand its professional network.

The company announced Monday that it was buying LinkedIn for $26.2 billion in an all-cash transaction, and that the social network for professionals would “retain its distinct brand, culture and independence.”

The blockbuster acquisition is Microsoft’s biggest to date, topping the $8.5 billion it spent on Skype in 2011 and the $7.2 billion it paid for Nokia ’s mobile phone unit in 2013.

Microsoft is paying $196 per share in an all-cash deal that represents a 50% premium on LinkedIn’s share price.  The price Microsoft is offering is a major validation for the company's future growth prospects, after LinkedIn's shares tanked by more than 40% in February.

That drop occurred after LinkedIn shared its full-year growth forecast of $3.6 billion, a number that fell well below analysts' expectations for $3.9 billion. LinkedIn also revealed at the time that growth in online ad sales had slowed to 20% in the fourth quarter of 2015, down from 56% a year earlier. Analysts argued then that with slower growth predicted for the future, LinkedIn's shares were trading at too high a multiple and looked expensive.

Microsoft said Monday that LinkedIn’s Jeff Weiner would stay on as chief executive, reporting to Microsoft’s chief executive, Satya Nadella.

Founded in 2002, LinkedIn went public in 2011 and now has 433 million members.

While Microsoft ended up writing off the $7.6 billion it paid for Nokia, in an acquisition which many saw as unsuccessful to the company’s mobile ambitions in the long term, Nadella said Microsoft would “accelerate the growth of LinkedIn,” together with its suite of business software tools Microsoft Office 365 and Dynamics.

Want to know more about big tech company investments? Listen to the latest episode of The Premise podcast.

The transaction has been unanimously approved by the boards of both LinkedIn and Microsoft, the company said in an official statement, and the deal is expected to close this calendar year, subject to approval by LinkedIn’s shareholders.

Billionaire Reid Hoffman, who co-founded LinkedIn and is a controlling shareholder, said he fully supported the transaction. “Today is a re-founding moment for LinkedIn,” he said. “I see incredible opportunity for our members and customers and look forward to supporting this new and combined business.”

Microsoft said it would finance the transaction by issuing new debt, and that the deal would dent its non-GAAP earnings-per-share by 1% for fiscal 2017.

LinkedIn's shares jumped 48% to $194.55 in pre-market trading on Monday morning in New York, about a buck and a half under the offer price  suggesting investors are confident a rival big won't emerge. Microsoft's shares declined by 4.2% to $51.48 in pre-market trading.

Microsoft released a brief video of Nadella and Weiner discussing the deal, below: