Facebook announced on Wednesday afternoon that it reached an agreement to buy popular mobile messaging startup WhatsApp for an upfront total of $16 billion, including $4 billion in cash and about $12 billion in Facebook shares.
Co-founder and CEO Jan Koum will join Facebook’s Board of Directors, but WhatsApp will continue to operate independently within Facebook, much like Instagram. The purchase price rises to as much as $19 billion once you factor in an additional $3 billion in restricted stock units that will be granted to WhatsApp’s founders and employees vesting over the next four years.
The purchase price is insanely high for a start up with only 55 employees, and many multiples of Facebook’s reported $3 billion bid for Snapchat last year. The $19 billion valuation means Facebook believes WhatsApp is worth over $42 per user. Major companies that have market caps under $19 billion include: United Continental, American Airlines, Ralph Lauren, Marriot International, Campbell Soup, Coach, and Tyson Foods.