Facebook buying Instagram for $300 million, 23 million shares

Facebook is not paying $1 billion for Instagram. Facebook is paying $300 million in cash and 23 million shares. Facebook has agreed to a $200 million break-up fee if the deal doesn't go through.
Written by Emil Protalinski, Contributor

Finally all the Instagram rumors can be put to rest. Okay, not all of them, but we finally have some official details about the acquisition price. Earlier this month, Facebook announced plans to acquire Instagram for approximately $1 billion in cash and stock.

That number is actually much more flexible: Facebook paid $300 million in cash and 23 million shares for Instagram. That means the amount Facebook pays for Instagram will fluctuate depending on Facebook's share price when it goes public.

That's assuming the deal goes through. Facebook also noted there is a $200 million break-up fee if it doesn't. Instagram will make money either way.

The new details come from Facebook's fourth amendment to its IPO filing today. Here's the relevant excerpt:

In April 2012, we entered into an agreement to acquire Instagram, Inc., which has built a mobile phone-based photo-sharing service, for approximately 23 million shares of our common stock and $300 million in cash. Following the closing of this acquisition, we plan to maintain Instagram's products as independent mobile applications to enhance our photos product offerings and to enable users to increase their levels of mobile engagement and photo sharing. This acquisition is subject to customary closing conditions, including the expiration or early termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (HSR), and is currently expected to close in the second quarter of 2012. We have agreed to pay Instagram a $200 million termination fee if governmental authorities permanently enjoin or otherwise prevent the completion of the merger or if either party terminates the agreement after December 10, 2012.

For reference, here are all the rumors related to the Instagram deal I'm talking about:

Facebook is expecting to close the Instagram acquisition this quarter. If Facebook ends up going public at more than $75 billion, it will pay more than $1 billion for Instagram, which is what the price tag was previously quoted at.

That's certainly possible, given that the last Facebook valuation on secondary markets was $102.8 billion, the highest yet. Then again, Facebook's just-released Q1 2012 financials aren't the best.

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