Facebook, in its largest purchase ever, agreed Wednesday to fork over $19 billion in cash and stock to buy mobile-messaging service WhatsApp.
The company, formed by two former Yahoo! executives, has 450 million monthly users and is better known outside the US, where it is more popular.
“WhatsApp had every option in the world, so I’m thrilled that they chose to work with us,” Facebook Chief Executive Mark Zuckerberg said on a conference call.
Facebook will pay $4 billion in cash and $12 billion in Facebook stock to WhatsApp shareholders, including venture capital firm Seqouia Capital, plus $3 billion in restricted stock units to WhatsApp’s founders and employees.
The restricted stock will vest over four years. The deal is expected to close later this year.
WhatsApp allows users to send messages while avoiding often costly mobile-phone messaging fees.
Facebook shares sank as much as 5 percent in after-hours trading as investors fretted over the steep price and how long it would take to pay off.
Zuckerberg said WhatsApp, which he expects to expand to 1 billion users by the end of the year, is a long-term investment that will pay off.
“Once we get it to be a service with 1 billion, 2 billion, 3 billion users, then we can think about monetizing,” Zuckerberg said when pressed on the business side of the deal.
“We’re not really concerned about monetization today, we’re focused on growth,” added WhatsApp co-founder and Chief Executive Jan Koum, who will receive a seat on Facebook’s board.
WhatsApp intends to make money through a subscription model, while Facebook relies on advertising, Koum said.