NEW YORK (TheStreet) - Morgan Stanley (MS) was pilloried for its role in running Facebook's (FB) May 2012 initial public stock offering, which sold $16 billion shares in the social network at a valuation of about $100 billion. Now, the investment bank has another $16 billion deal involving Facebook; the company's acquisition of messaging application WhatsApp, announced on Wednesday.
This time, however, Morgan Stanley is on the other side of the table.
The investment bank advised WhatsApp on its sale to Facebook in the $16 billion deal, which will be paid with $4 billion in cash and $12 billion in Facebook stock at an exchange ratio of $65.2650 a share. Additionally, the deal will give WhatsApp's founders and employees $3 billion in restricted stock units that will vest over four years subsequent to closing of the acquisition, bringing to the total for the deal to $19 billion.
At Wednesday closing share prices, the deal would dilute Facebook investors by less than 8% when counting the stock component of the deal and restricted stock units. The deal will also carry a $2 billion breakup fee, split between $1 billion in cash and $1 billion in stock.
Wednesday's merger, if completed, would significantly boost Facebook's presence in mobile messaging, helping it to compete with messaging apps on Apple (AAPL) and Google (GOOG) handsets and a new breed of messaging-based social networks like Snapchat. Facebook's existing Messenger app will remain independent, the company said.
Currently, over 450 million people use WhatsApp each month, with 70% of those users active on a given day. Facebook said the combination will help accelerate growth and user engagement across both companies.