Facebook To acquire WhatsApp for $16B
On February 19, 2014, Facebook, Inc. (Parent) entered into an Agreement and Plan of Merger and Reorganization (the Merger Agreement) with Rhodium Acquisition Sub II, Inc., a Delaware corporation and wholly owned (in part directly and in part indirectly) subsidiary of Parent (Acquirer), Rhodium Merger Sub, Inc., a Delaware corporation, a direct wholly owned subsidiary of Acquirer (Merger Sub), WhatsApp Inc., a Delaware corporation (WhatsApp), and Fortis Advisors LLC, as the stockholders agent. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into WhatsApp (the First Merger), and upon consummation of the First Merger, Merger Sub will cease to exist and WhatsApp will become a wholly owned subsidiary of Acquirer.
The surviving corporation of the First Merger will then merge with and into Acquirer, which will continue to exist as a wholly owned (in part directly and in part indirectly) subsidiary of Parent. Upon consummation (the Closing) of the transactions contemplated by the Merger Agreement (the Merger), all outstanding shares of WhatsApp capital stock and options to purchase WhatsApp capital stock will be cancelled in exchange for an aggregate of 183,865,778 shares of Parents Class A common stock (valued at $12 billion based on the average closing price of the six trading days preceding February 18, 2014 of $65.2650 per share (Specified Price)) and $4 billion in cash to existing WhatsApp securityholders, subject to certain adjustments such that the cash paid will comprise at least 25% of the aggregate transaction consideration. In addition, upon Closing, Parent will grant 45,966,444 restricted stock units to WhatsApp employees (valued at $3 billion based on the Specified Price).
The Merger Agreement contains customary representations, warranties and covenants by Parent and WhatsApp. A portion of the aggregate consideration will be held in escrow to secure the indemnification obligations of the WhatsApp securityholders. The Closing of the Merger is subject to customary closing conditions, including regulatory approvals. The Merger is anticipated to close later in 2014. Upon Closing, Jan Koum, WhatsApps co-founder and CEO, will become a member of Parents board of directors. In addition, Parent has agreed to file a Registration Statement on Form S-3 covering the resale of the shares of the Companys Class A common stock to be issued to the stockholders of WhatsApp.
Either Acquirer or WhatsApp may terminate the Merger Agreement if the Closing has not occurred on or before August 19, 2014 (or August 19, 2015 if, as of August 19, 2014, all closing conditions have been completed except for the receipt of certain regulatory approvals). In the event of termination of the Merger Agreement, under certain circumstances principally related to a failure to obtain required regulatory approvals, the Merger Agreement provides for Acquirer to pay or cause to be paid to WhatsApp a fee of $1.0 billion in cash and to issue to WhatsApp a number of shares of Parents Class A common stock equal to $1.0 billion (based on the average closing price of the ten trading days preceding such termination date).