Microsoft Announces Bid to Buy LinkedIn for $26.2 Billion

Should the deal not close as expected, LinkedIn will be required to pay Microsoft a deal break-up fee of $725 million, according to the company’s regulatory filings. LinkedIn boss Jeff Weiner has insisted he will continue to be allowed to operate his firm independently, within Microsoft, but as Nadella presumably intends for LinkedIn to stop being a loss-making business, it’s hard to see how that would be the case.

The deal will see Microsoft paying 196 USA dollars per share (£138) for the social media website in an all-cash transaction funded by issuing new debt. In a phone call with Reuters, Weiner said LinkedIn would remain its own entity in the way that YouTube is relatively independent from parent Alphabet, or Instagram from parent Facebook.

LinkedIn’s stock was down more than 43 percent since July of previous year, and there wasn’t much reason to believe it would regain that value anytime soon.

Shares had plunged 42% this year, before the deal was announced.

He gave an example of a customer walking into a meeting scheduled on a Microsoft Outlook calendar integrated with LinkedIn, receiving notification that one of the people in the meeting went to college with a colleague. With Cortana, Microsoft is looking to add a predictive component to the digital assistant by leveraging users’ LinkedIn professional networks.

Responding to media, Satya Nadella disclosed that the LinkedIn team has established a strong presence in the professional social media sector by connecting professional across the world.

“When we started to get into serious discussions, Satya and I, during that first meeting he said we have to ensure that their is alignment in two key areas, one is objective and the other is Structure”, stated Weiner.

LinkedIn’s most recent deal was an acquisition of an online learning company, Lynda, for $1.5 billion.

LinkedIn’s shares soared 48 percent to $194.00 in early New York Stock Exchange trading and Microsoft’s shares were down 4 percent. Nadella said in the press release that he hopes the acquisition will “accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organisation on the planet”.

For Microsoft, the deal means access to LinkedIn’s hundreds of millions of users and an opportunity to cement itself as the tech company for the world’s professionals, helping them find jobs, learn new skills and do their work.

Microsoft said it would finance the deal mostly by issuing new debt.

Commenting on the acquisition, Weiner revealed that by combining Microsoft’s cloud network, LinkedIn will be scale by up to 200 percent.

LinkedIn, which is based in Mountain View, California, floated on the stock market in May 2011.

Even if LinkedIn does become profitable under Microsoft’s aegis, $26bn is a lot of money, far too much for a long shot.