Is Microsoft-LinkedIn 'Creating The Facebook For The Enterprise?'

On June 13, Microsoft Corporation MSFT announced that it intended to acquire LinkedIn Corp LNKD for $196 per share or $26.2 billion in cash.

Goldman Sachs’ Heather Bellini maintains a Neutral rating on Microsoft, with a price target of $56.

The Deal

“The proposed deal comes at a 50 percent premium to LNKD’s last closing price and compares to its 52 week high of ~$258. This deal, if completed, would combine MSFT’s leading professional cloud and LNKD’s professional network and is expected to close in F2Q17,” Bellini mentioned.

Related Link: Pro: Microsoft-LinkedIn Merger Is A "Win-Win" Proposition

LinkedIn CEO Jeff Weiner will continue in his role, but report to Microsoft’s CEO, once the deal is completed.

Bellini believes that the proposed deal offers high value, since it combines the “complementary information graphs” of Microsoft and LinkedIn, while driving the growth of the combined user based.

Microsoft intends to finance the proposed transaction mainly through the issuing of new debt.

What The Acquisition Would Mean

The analyst estimates that if Microsoft acquired LinkedIn at a 2 percent all-in cost of funding and achieved cost synergies of $100 million in FY17, the deal would be dilutive to the former company’s FY17 non-GAAP EPS by $0.03.

On the other hand, if the cost of funding was 3.5 percent and synergies of $25 million were achieved, the deal would be dilutive by $0.06.

“We believe LinkedIn’s product suite also offers potential for revenue synergies via cross-sell and up-sell into MSFT’s large customer base,” Bellini added.