Shares of LinkedIn Corp. jumped nearly 50% Monday after the company said Microsoft will buy it in a $26.2 billion deal that would merge Microsoft’s enterprise cloud services with the professional social network.
The all-cash transaction amounts to $196 a share, a 50% premium to Friday’s closing price.
LinkedIn shares were up some 47% as of Monday afternoon. Excluding Monday’s rally, LinkedIn LNKD, +0.15% shares had been up 14% over the last three months but down nearly 40% over the last year, underperforming the S&P 500. They are still down 14% in 2016.
Jeff Weiner will remain CEO of LinkedIn, reporting directly to Microsoft CEO Satya Nadella. The deal is expected to close later this year, pending regulatory approvals. Both company’s boards have unanimously approved the acquisition.
“In essence, we can reinvent ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes,” said Nadella in a public message to Microsoft employees.
LinkedIn’s results will be reported under Microsoft’s productivity and business processes segment, which includes Office and Office 365. In April, Microsoft reported a 1% quarterly increase to $65 million for that unit.
Last quarter, LinkedIn reported revenue of $861 million, a year-over-year increase of 35%. In a statement, Microsoft said it expects the acquisition to have “minimal dilution” or roughly 1% to non-GAAP earnings per share for the remainder of fiscal-year 2017 and for all of fiscal 2018.
The deal is expected to boost non-GAAP earnings Starting in fiscal 2019, Microsoft said.
Microsoft might have overpaid for LinkedIn, but it’s too soon to tell, according to Patrick Moorhead, founder and principal analyst at Moor Insight & Strategy. Moorhead said the deal could bolster Microsoft’s enterprise cloud offerings, which grew more slowly than expected last quarter.
“Based on the income statement and balance sheet, the numbers look high for an acquisition,” Moorhead said. “I see the potential for a beefed up business social media service which is more than a resume posting service as it is today. I can envision a service where businesses more freely collaborate, leveraging online versions of Office 365, Skype for business and OneDrive.”
Microsoft’s shares fell 4.7% early Monday. Its shares are down 3% over the last three months and up 12% over the last year. Microsoft said it would finance the transaction by issuing new debt.
Microsoft continues to expect to complete a $40 billion buyback plan in 2016.
Some analysts had described LinkedIn as a potential takeover target earlier this year.
Linkedn sought to create a stable position for itself while retaining some independence, according to Weiner.
“Imagine a world where we’re no longer looking up at tech titans such as AppleAAPL, -0.20% Google GOOG, -0.02% Microsoft, Amazon AMZN, -0.10% and Facebook, and wondering what it would be like to operate at their extraordinary scale — because we’re one of them,” Weiner said in a statement.
In LinkedIn’s latest quarter, the company reported stronger revenue in its talent solutions business, which helps recruiters connect with potential job seekers. Total membership soared 19% year-over-year to more than 433 million, while job listings increased 101% to 7 million active jobs.
LinkedIn Chairman Reid Hoffman called the transaction a “re-founding moment” for the company, which went public in May 2011 at $45 per share.