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Microsoft to buy software development platform GitHub in $7.5B all-stock deal

Microsoft Corp. struck a $7.5 billion all-stock deal to acquire software development platform GitHub Inc.

The developer-focused GitHub will be part of Microsoft's Intelligent Cloud segment after the deal closes, which is expected to occur by the end of calendar year 2018. The companies said June 4 they expect the deal will bring GitHub to more enterprise users and expand Microsoft's developer tools and services to new audiences. Microsoft Corporate Vice President Nat Friedman will head GitHub as CEO. GitHub's current CEO, Chris Wanstrath, will become a Microsoft technical fellow working on strategic software initiatives.

GitHub will continue to operate independently with an open platform available to all developers across operating systems, cloud systems and devices, the companies said. Private equity investors in GitHub include Andreessen Horowitz, Institutional Venture Partners, Sequoia Capital and Thrive Capital, according to S&P Global Market Intelligence data.

Microsoft expects the acquisition will be accretive to its operating income in fiscal year 2020 on a non-GAAP basis, with dilution of less than 1% to EPS in fiscal years 2019 and 2020 on a non-GAAP basis, based on the expected close time frame.

Microsoft will use a portion of the remaining $30 billion of its current share repurchase authorization for the purchase.

Simpson Thacher & Bartlett LLP is acting as legal adviser to Microsoft. Morgan Stanley is acting as exclusive financial adviser to GitHub, while Fenwick & West LLP is acting as its legal adviser.