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Microsoft to Buy LinkedIn for $26.2 Billion in Cash

Largest deal in Microsoft's history aimed at bolstering connection to business users

Microsoft has reached a deal to acquire LinkedIn for $26.2 billion — the largest acquisition in the tech company’s history — to dive into the social-networking realm and secure a new launchpad to connect with business users across the globe.

Under the terms of the deal, Microsoft will acquire LinkedIn for $196 per share in an all-cash transaction, about a 50% premium over LinkedIn’s closing price Friday, inclusive of LinkedIn’s net cash.

LinkedIn, a networking and job-search site aimed at business users, has more than 400 million users worldwide. The acquisition will give Microsoft an engine to push its Office productivity and collaboration software to biz customers, along with other services. According to Microsoft, LinkedIn will retain its brand and will operate as an independent division.

Jeff Weiner will remain CEO of LinkedIn, reporting to Microsoft CEO Satya Nadella. According to the companies, Weiner and Reid Hoffman, LinkedIn’s chairman, co-founder and controlling shareholder, both fully support the transaction.

LinkedIn had about 433 million registered members worldwide as of the end of the first quarter of 2016, up 19% year over year, and touts 105 million monthly unique visitors. The site has around 7 million active job listings, and some 9 million company pages.

“The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Nadella said in announcing the deal Monday. “Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.”

The deal, which has been approved by both companies’ boards, is expected to close by the end of 2016 subject to regulatory approvals and other closing conditions.

Previously, Microsoft’s biggest acquisitions have been Skype for $8.5 billion in 2011 and Nokia’s mobile devices business for $7.2 billion in 2014 — the latter of which has been a debacle, leading Microsoft to slash headcount in the Nokia division and write down most of the value of that deal.

Following the close of the LinkedIn deal, Microsoft expects to report LinkedIn’s financials as part of the Microsoft Productivity and Business Processes segment. Microsoft said it expects the acquisition to have “minimal dilution” of about 1% percent to adjusted earnings per share for the remainder of fiscal year 2017 (which ends June 30, 2017) after the deal closes, and through fiscal year 2018. Microsoft anticipates LinkedIn becoming accretive to earnings in fiscal year 2019.

LinkedIn’s stock took a massive hit in February, falling more than 40% after issuing weaker-than-expected guidance for 2016. On Monday following the Microsoft announcement, LinkedIn opened up 48%, at $192.84 per share, although still well below its 52-week high of $258.39.

In Q1, LinkedIn reported total revenue of $861 million, up 35% year over year, and a net loss of $45.8 million versus a net loss of $42.5 million in the year-earlier period. The company posted adjusted net income of $99 million (excluding stock-based compensation, amortization and other items) compared with $73 million last year. At the end of the quarter, LinkedIn held $3.2 billion in cash and marketable securities.

LinkedIn will be required to pay Microsoft a breakup fee of $725 million if the deal is terminated, according to SEC filings from the companies.

Mountain View, Calif.-based LinkedIn was founded in 2002. The company had about 9,200 employees as of January.

Pictured above (l. to r.): LinkedIn CEO Jeff Weiner, Microsoft CEO Satya Nadella, LinkedIn chairman Reid Hoffman

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