Microsoft buys LinkedIn for $26bn in cash

Microsoft has said that it is buying the professional networking website LinkedIn for just over $26bn (£18bn) in cash.

The software giant will pay $196 a share – a premium of almost 50% to Friday’s closing share price.

The deal will help Microsoft boost sales of its business and email software.

Microsoft said that LinkedIn would retain its “distinct brand, culture and independence”.

Ben Wood, head of research at CCS Insight, said the deal would give Microsoft access to the world’s biggest professional social network with more than 430 million members worldwide.

“That’s a valuable asset that can be deeply integrated with a number of Microsoft assets such as Office 365, Exchange and Outlook. That said, Microsoft has stated that the company will continue to operate as an independent business, so we’ll have to see how deeply the integration occurs,” Mr Wood said.

Analysis

Ever had one of those annoying LinkedIn emails inviting you to “endorse” a contact for some skill or another? Perhaps LinkedIn chief executive Jeff Weiner and its founder Reid Hoffman deserve to be endorsed for salesmanship after today’s deal.

After a tricky period in which the shares have fallen amid widening losses, they have persuaded Microsoft to make its biggest deal. The software giant is paying a 50% premium on Friday’s closing share price to buy LinkedIn, a price which amounts to $250 (£170) for every active user. To put that into context, that’s about the market value of Sky, or eight times as much as Daily Mail owner DMGT – and they are both profitable.

But this deal is about more than money: it is meant as a powerful signal of where Satya Nadella is now taking Microsoft. He sees its future as a cloud computing business providing all sorts of professional services to clients – including a social network to connect them to each other.

“We are trying to ride the wave of the new technologies,” Mr Nadella told me from Seattle. “It’s about AI, it’s about mobile, it’s about cloud and we’re trying to bring those things together.”

However, the deal to buy Nokia’s mobile phones division had a similar logic – and the entire value of that purchase was written off just a year later. So Microsoft’s investors may look at that $26bn price tag nervously, while anyone with a few LinkedIn shares may be using the network to send a message of congratulations to their board.

Microsoft chief executive Satya Nadella said he had long admired LinkedIn: “I have been thinking about this for a long time.”

The deal was “key to our bold ambition to reinvent productivity and business processes”, he added.