Facebook is currently in advanced negotiations to buy the Israeli navigation company Waze. The total purchase price is said to be roughly $1 billion, significantly higher than the $200 million to $300 million Facebook is believed to have offered Waze only six months ago.
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Half would be paid in cash, the other half in shares of Facebook.
The main sticking point at this stage of the negotiations is Waze management's demand that the company remain in Israel. Facebook has reportedly agreed, however, to allow Waze to continue operating as an independent company under its own brand name; development operations would remain in Israel, while the business end of the company would be absorbed by Facebook.
In the past, when Facebook purchased Israeli companies Snaptu and Face.com, Facebook closed the companies' local operations and moved their core development teams to Silicon Valley. Facebook has yet to open a development center in Israel.
Talk of a possible deal between Facebook and Waze began in March of last year, when Waze representatives visited Facebook headquarters to discuss opportunities for cooperation. Since then, Waze CEO Noam Bardin and company lawyers have met frequently with senior Facebook management.
Both companies are apparently eager to make the deal, and all signs point to the two companies signing off on the sale in the coming weeks. With Facebook looking to strengthen its mobile department, Waze’s mobile navigation application, which involves social components, could indeed be a good fit.
There is no investment bank involved in the deal at this point, with Bardin taking the reins himself. The breakdown of cash to Facebook shares that Waze shareholders would receive also has not been finalized, and could be anywhere from 40% to 60%.
This is not the first time news regarding the possible sale of Waze has made headlines, nor is it the first time Facebook is rumored to have been eyeing the Israeli company. Over the last year, Facebook, Apple and Google have all reportedly made offers to purchase Waze, without success.
In January, Waze reportedly received an offer from Apple of about $500 million, but refused to sell for less than $1 billion. Apple had suffered a blow due to problems in the iPhone’s built-in navigation application. When Apple CEO Tim Cook suggested using a different navigation application, such as Waze, Waze’s market share shot up from 7% to 10% in a matter of days.
Waze also received and rejected an offer about six months ago, apparently from Facebook, of between $200 million and $300 million.
Waze was founded in 2008 by Uri Levine, Ehud Shabtai and Amir Shinar. Bardin, the CEO, currently lives in the United States. The company generates income via location-based advertising by naming brands and stores on its mobile navigation app, and by alerting users to nearby sales and special offers.
Waze has earned $67 million since its inception. In October 2011, Hong Kong multibillionaire Li Ka-shing invested $30 million in the company through his investment firm Horizon Ventures, as well as through the investment firm Kleiner Perkins Caufield and Byers. In 2010, when the company was valued at $100 million, it raised another $25 million from Microsoft, Vertex Venture Capital, Magma, BlueRun Ventures and Qualcomm Ventures.