WhatsApp rejected $10 billion from Google; did Facebook get a bargain?

WhatsApp rejected $10 billion from Google; did Facebook get a bargain?
Now that WhatsApp has agreed to be bought out by Facebook for a staggering $19 billion, it is time to sit back and reflect on the deal. First of all, in the light of a brand new day comes an interesting story. Apparently, Google also had eyes for the messaging app, and offered $10 billion for the company. But that offer was rejected. One, the price wasn't high enough, and two, that deal did not offer WhatsApp CEO Jan Koum a board seat. Facebook's bid did.

Now comes the tough question. Did Facebook overpay? Heck, there are some that think Facebook overpaid when it shelled out $1 billion in cash and stock for Instagram. And actually, since most of that acquisition was paid for in declining Facebook shares (at the time), the actual price came to about $750 million by the time the deal closed. With the vast majority of the WhatsApp purchase being paid for in stock, there is also the chance that the value of the new deal wil fall as well before it closes. Already this morning, Facebook shares are down 2% which drops the value of the deal by $300 million.

According to some Wall Street analysts, Facebook actually made a fine bargain. Consider that Facebook's shares are valued at a price of $144 per user. The social networking site is paying $42 per WhatsApp user. On the other hand, the valuation of the deal also puts WhatsApp at the same level as pharmaceutical firms working on life-saving drugs.
 
The deal works for Facebook because of Wall Street's amazing money multiplier effect. WhatsApp has 450 million monthly visitors. Once they become Facebook's visitors when the deal closes, Wall Street will put the same valuation on them as it does Facebook's current subscribers. That means 450 million WhatsApp members will see their value rise by $102 each (in theory of course) which works out to $45 billion in extra valuation for Facebook. Of course, in real life things don't work as clear cut as that. But in the world of Wall Street, that is how M&A deals are thought out.

Facebook and WhatsApp will surely have a smooth conclusion to the merger, and then Facebook will need to roll up its sleeves and get to work to prove that the deal was worth every penny paid.

source: Bloomberg, BGR

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27 Comments

1. papss unregistered

Although I don't like the idea of anyone buying whatsapp I'm glad they went with FB instead.

6. protozeloz

Posts: 5396; Member since: Sep 16, 2010

why? so you have all of the Facebook annoyances?

14. papss unregistered

See I'm used to Facebook annoyances since I use WP lol.. I like FB massager and whatsapp but I hope they don't gut the patents from whatsapp and let them do their thing.

18. magnanimus

Posts: 565; Member since: Mar 29, 2013

I would prefer if google had got it. Have a little flashback into previous google purchases. When they purchased Motorola it gave us the Moto X. When they purchased android, see what it is now (Even tho you wouldn't like to admit, android is pretty successful). I trust in google to bring something good out of whatsapp more than facebbok. (Mainly because it will be integrated into google services which can be used on any mobile platform be in Windows, iOS or Android)

20. papss unregistered

Did you forget about what google did with Moto? Sure some great phones but they gutted them and then sold them to someone else.. Not at all being a fanboy but that doesn't bod well with me. we should wait and see what FB does with them before hating on them is all I'm saying. I'm about done with all three mobile os companies buying up all the companies.

23. protozeloz

Posts: 5396; Member since: Sep 16, 2010

I don't know, while I think whatsassp is a great popular application is lacking so much, viber is much more complete, but Facebook keeps everything mostly the same, id rather have MS buy it and merge whatsaapp and skype into a single all in one instant messaging and video chat app, maybe with enough time will get that but honestly only good thing about whatsapp is userbase

7. LiyanaBG

Posts: 381; Member since: Nov 07, 2013

i deleted whatsapp because facebook bought it. and i use viber now.

9. protozeloz

Posts: 5396; Member since: Sep 16, 2010

I like viber overall, (at least has added more functionality than whatsapp, but it doesn't have enough friends so I'd stick with what's app

10. kamen

Posts: 103; Member since: Jul 18, 2011

Just do not forget to delete your account as I did :)

16. tech-blast

Posts: 19; Member since: Dec 07, 2011

viber doesn't save your message history which whatsapp does.

22. Whateverman

Posts: 3295; Member since: May 17, 2009

I can understand that given the tention between Google and Microsoft. You never know what Google will do when I comes to supporting WP and vise versa, so this is good news for both sets of users. I was hoping Google would buy it because they could use a little help improving Hangouts messaging.

2. XperiaFanZone

Posts: 2280; Member since: Sep 21, 2012

Google should have bought it or Microsoft if any company would. And the founder got rejected for a job at Facebook in 2009. Just saying.

3. Kyokado

Posts: 115; Member since: Jul 11, 2013

Phonearena should acquire evleaks. :)

4. kushki

Posts: 49; Member since: Nov 19, 2012

Better fb thn scroogle...

5. papss unregistered

Stop man... No reason to start a war of OS here.

8. axllebeer

Posts: 272; Member since: Apr 05, 2011

Eh, I. Really don't know how I feel about this. Wish I could look a year ahead and see what all they are going to do with it.

11. RebelwithoutaClue unregistered

I will switch as well, don't like FB at all and installed viber today. I like it so far.

12. Dude2014

Posts: 448; Member since: Feb 12, 2014

In Asian countries, weChat is number one messager so far.

13. Dude2014

Posts: 448; Member since: Feb 12, 2014

^messenger

17. Kyokado

Posts: 115; Member since: Jul 11, 2013

BS. I live in sg. Whatsapp. Still top.

19. saiki4116

Posts: 413; Member since: Mar 31, 2011

Defintely not in India, Even after so much of marketing done by Wechat with BollyWood FilmStars

21. Kyokado

Posts: 115; Member since: Jul 11, 2013

Then whats top in indian?

26. checkmymike

Posts: 221; Member since: Dec 28, 2011

In philippines, its viber.

15. alumoyo

Posts: 392; Member since: Aug 26, 2013

I complained a lot this morning, but in hindsight, it COULD HAVE BEEN WORSE. Google would have DEFINITELY used its as a way to try and force us to use Google+ and Hangouts more. And facebook bought Instagram A WHILE ago - they haven't really messed with that in any bad way. Its actually gotten a bit BETTER.

27. kanagadeepan

Posts: 1278; Member since: Jan 24, 2012

Actually FB dont know what to do with Instagram.. Even their owner Mark, don't know what to do with the money.

24. AfterShock

Posts: 4147; Member since: Nov 02, 2012

It died with the news of it being sold imo.

25. jojon

Posts: 437; Member since: Feb 11, 2014

nope, best app out there is Line, puts Viber and Whatsapp very much in second place

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