Facebook Inc. said it received a so-called “second request” from the U.S. Federal Trade Commission for information about the proposed purchase of Instagram Inc., extending the time the agency can take to review the transaction.
Facebook last month offered to buy the photo-sharing site for $300 million in cash plus about 23 million shares of common stock, a deal valued at $1 billion when it was announced. Under antitrust law, regulators must issue the second request to companies that have proposed to merge when the agency reviewing a particular transaction decides it needs more than 30 days to make a decision about whether or not to approve the deal.
“We’ll continue to work closely with the FTC as the agency reviews this transaction and look forward to answering any questions that arise,” the Menlo Park, California-based company said yesterday in an e-mailed statement.
Facebook shares fell 1.1 percent to $28.52 at 9:34 a.m. in New York. Before today, the stock had dropped 24 percent since it started trading.
The FTC is looking at whether Facebook’s acquisition of Instagram could hurt competition in the social networking market by making the company or its services inaccessible to rivals, said two people familiar with the situation who declined to be identified because they weren’t authorized to speak about the matter.
Facebook said it expected its purchase of San Francisco-based Instagram to close by the end of the year. When the deal was announced last month, the company said it anticipated completing the transaction in the second quarter.
Both the FTC and the antitrust division of the Justice Department have authority to review mergers to ensure they don’t hurt competition. The two agencies divide up the reviews based on expertise through an internal clearance process. If after 30 days the reviewing agency doesn’t issue a second request or move to block a given transaction, the companies may close a deal.
Peter Kaplan, an FTC spokesman, declined to comment on the review. Reuters reported yesterday on the second request by the FTC.