Microsoft has struck a deal to buy professional social networking company LinkedIn for a cool $26.2bn (£15.9bn) in cash – not bad for a company which has yet to make a profit.
Microsoft will pay $196 per LinkedIn share, a 50% premium to LinkedIn’s closing price on Friday and the deal is expected to close within the year. LinkedIn has been unprofitable despite rapidly growing sales, it has also faced large-scale, data breaches. Just last month it was claimed that over 100 million log-ins for the site were for sale.
In a blog post, Microsoft said LinkedIn will “retain its distinct brand, culture and independence,” with chief executive Jeff Weiner now reporting to Microsoft CEO Satya Nadella.
The companies predict cost savings of about $150m (£105m) a year by 2018. LinkedIn would be required to pay $725m (£509m) break-up fee if it backs out of the deal.
“Today there is no one source of truth for an individual profile – the data is often scattered across many endpoints often with outdated or incomplete information,” Microsoft said in an investor presentation. “In the future, a professional’s profile will be unified and the right data at the right time will surface in an app, whether Outlook, Skype, Office, or elsewhere.”
In a letter to employees, Weiner said the acquisition would help LinkedIn weather intensifying competition in the tech landscape.
“Imagine a world where we’re no longer looking up at Tech Titans such as Apple, Google, Microsoft, Amazon, and Facebook, and wondering what it would be like to operate at their extraordinary scale – because we’re one of them,” Weiner wrote. “With today’s news, we won’t need to imagine any of it because it’s now our reality.”
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