The deal is made up of $4 billion in cash and $12 billion in stock, and will give Facebook access to the 450 million people using the WhatsApp service monthly. WhatsApp will also garner Facebook's huge amount of resources, including its large cash backing, numerous employees and engineers, and infrastructure to grow.
"WhatsApp is on a path to connect 1 billion people," Mark Zuckerburg, founder and CEO of Facebook, said. "The services that reach that milestone are all incredibly valuable. I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."
WhatsApp, technically called WhatsApp Messenger, uses your 3G or Wi-Fi to send and receive messages. It's available across iOS, Android, Windows Phone, and BlackBerry. Users can switch from the traditional SMS to WhatsApp to send and receive things like pictures, audio notes, and video messages. The first year is free, but it costs 99p every year after.
"WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide," Jan Koum, WhatsApp co-founder and CEO, said. "We're excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world."
If for some reason the deal were to be canned and not go through, Facebook would have to pay WhatsApp a sizeable breakup fee of $1 billion in cash. In addition to the $16 billion buyout price, upon closing the deal, Facebook will grant $3 billion in stock to WhatsApp employees - making the deal a total of $19 billion.
Doing the math, the deal works out to be $40 per WhatsApp user. The stock market isn't reacting positively to the announcement, with Facebook down 5 per cent in extended trading.