Technology giant Microsoft is buying professional networking website LinkedIn for $26 billion in an all-cash deal. Microsoft priced LinkedIn shares at $196 per share, giving almost a 50 percent premium over the company's share price at the close of trading on Friday. The tech company said that LinkedIn would maintain its "distinct brand, culture and independence."

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Microsoft is likely to use LinkedIn for gathering professional information. It may also LinkedIn for creating new distribution channels for its software products. Meanwhile, LinkedIn will benefit from the infusion of capital.

Following the announcement of the deal, the net worth of Reid Hoffman, the co-founder and chairman of LinkedIn, jumped by more than $900 million, on account of the increase in the company's share prices. Hoffman is a controlling shareholder in the company. He is expected to get $2.9 billion for the sale of his stake.

Microsoft is currently struggling with its dwindling market share and high competition. LinkedIn also saw a decline in its growth rate as well as in its stock price. The company's share price declined by 42 percent this year. LinkedIn earned $3 billion in revenue in 2015, and its user database stands at 433 million people worldwide.

According to the deal, LinkedIn will continue to exist as a brand. Its CEO Jeff Weiner will also retain his position. However, now he would report to Microsoft CEO Satya Nadella.

Speaking to the BBC, Nadella said, "We are trying to ride the wave of the new technologies. It's about AI, it's about mobile, it's about cloud and we're trying to bring those things together."

Meanwhile, LinkedIn CEO Weiner referred to the deal as a "re-founding moment for LinkedIn."

TagsMicrosoft, LinkedIn