Deal of the Week: Facebook to buy WhatsApp for $19 billion Announcement Date February 19, 2014 Acquirer Facebook (Nasdaq: FB) Acquirer Description Operates as a social networking company worldwide. It provides a set of development tools and application programming interfaces that enable developers to integrate with Facebook to create mobile and Web applications Incorporated in 2004 and headquartered in Menlo Park, California Acquirer Financial Mkt Cap: $170.4 billion LTM EBITDA: $3.8 billion Statistics EV: $160.1 billion LTM EV / Revenue: 20.3x LTM Revenue: $7.9 billion LTM EV / EBITDA: 40.7x Target Company WhatsApp Target Description Proprietary, cross‐platform instant messaging subscription service for smartphones. In addition to text messaging, users can send each other images, video, and audio media messages as well as their location using integrated mapping features Founded in 2009 by Americans Brian Acton and Jan Koum (also the CEO), both former employees of Yahoo!, and based in Mountain View, California Price / Consideration Price: $19 billion Consideration: Cash & Stock Parent Advisors Allen & Co Target Advisors Morgan Stanley Rationale The deal provides Facebook access to new users, including teens who eschew the mainstream social networks but prefer WhatsApp and rivals, which have exploded in size as private messaging takes off Deal Points Facebook will buy WhatsApp for $19 billion in cash and stock in a deal that places the world's largest social network closer to the heart of mobile communications and may bring younger users into the fold The transaction involves $4 billion in cash, $12 billion in stock and $3 billion in restricted stock that vests over several years The WhatsApp deal is worth more than Facebook raised in its own IPO and underscores the social network's determination to win the market for messaging Of Note Facebook is paying $42 per user with the deal, dwarfing its own $33 per user cost of acquiring Instagram. By comparison, Japanese e‐ commerce giant Rakuten just bought messaging service Viber for $3 per user, in a $900 million deal Venture capitalist Sequoia Capital, which invested in WhatsApp in 2011, holds a stake worth roughly $3 billion of the $19 billion valuation WhatsApp will continue to operate independently, and promised to continue its policy of no advertising © Pillars of Wall Street 2014 www.pillarsofwallstreet.com .