Feb. 20 (Bloomberg) -- The relationship between Facebook Inc. and WhatsApp Inc. started in spring 2012 over coffee at a German bakery. It was consummated on Valentine’s Day with chocolate-covered strawberries, after just five days of talks.
Facebook, the world’s largest social network, agreed yesterday to acquire mobile-messaging startup WhatsApp for as much as $19 billion in cash and stock, seeking to expand its reach among users on mobile devices.
Mark Zuckerberg, Facebook’s chief executive officer, first reached out to WhatsApp CEO Jan Koum in early 2012, inviting him for coffee at the bakery in Los Altos, California. They ended up talking for more than two hours, according to a person with knowledge of the matter.
The two became friends, meeting frequently for dinners and hiking together.
On Feb. 9, Koum, 38, went to Zuckerberg’s house in Palo Alto, California, for dinner. That’s when the conversation about a possible deal became serious, the person said. The two first talked about how they could work together more closely on Zuckerberg’s Internet.org initiative for connecting the world on mobile devices.
Zuckerberg, 29, then proposed that their companies join together and that Koum join Facebook’s board. Koum took a few days to think it over. Five days later, on Feb. 14, Zuckerberg was having dinner with his wife at home when Koum showed up, strawberries in hand. They then negotiated a price.
The purchase would be the biggest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, according to data compiled by Bloomberg. The accord includes $12 billion in stock, $4 billion in cash and $3 billion in restricted shares, Facebook said yesterday. WhatsApp has more than 450 million members, with 1 million users being added daily, Facebook said.
The shares of Menlo Park, California-based Facebook rose 1.8 percent to $69.30 at 3:05 p.m. in New York.
Mountain View, California-based WhatsApp, which is popular in Europe, lets users send messages through its service on mobile devices based on different operating systems including Apple Inc.’s iOS, Google Inc.’s Android, Microsoft Corp.’s Windows Phone and BlackBerry Ltd.’s software.
Google also expressed interest in acquiring WhatsApp, two people with knowledge of the matter said. Tim Drinan, a spokesman for Google, declined to comment on an offer.
Unlike traditional text messages, which consumers pay for through their mobile-phone plans, WhatsApp is free for the first year and costs 99 cents a year after that. It competes with Tencent Holdings Ltd.’s WeChat in China, KakaoTalk in South Korea and Line in Japan, as well as Facebook’s own application, Facebook Messenger.
Koum co-founded the company with Brian Acton, 42, in 2009 after almost a decade as an engineer at Yahoo! Inc. Venture capital firm Sequoia Capital invested $8 million in WhatsApp in 2011, for a more than 15 percent stake that is now worth about $3.5 billion, according to people with knowledge of the deal.
Koum’s likely windfall from the deal stands in stark contrast to his years as a teenager, when his family relied on food stamps after emigrating from Ukraine.
Acton grew up in Michigan and was employee No. 44 at Yahoo, working on advertising, shopping and travel services, according to Wired. He later hired Koum at Yahoo and served as his mentor, inviting him over to his house and taking him skiing, Forbes said.
Acton said Facebook turned him down for a job in an August 2009 Twitter post. He introduced WhatsApp the same year.
“Looking forward to life’s next adventure,” he wrote.
The two founded WhatsApp with the idea that smartphone users should be able to easily message each other without incurring fees from phone carriers. They eschewed marketing and didn’t employ a public relations person, relying on the word-of-mouth recommendations of its users instead.
Koum said in a statement on the company’s website that WhatsApp will remain autonomous and operate independently.
“There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product,” he said.
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