Facebook to buy virtual reality headset maker start-up Oculus for $2 bn

Making its second mega acquisition this year, Facebook yesterday struck a deal to buy 20-month start-up Oculus VR Inc, a maker of a virtual reality headset, for $2 billion in cash and stock.

The deal comes a month after Facebook agreed to buy the popular smartphone-messaging app WhatsApp for a whopping $16 billion, its biggest acquisition to date. (See: Facebook to buy smartphone-messaging app WhatsApp for a staggering $16 bn)

Under the terms of the deal, Facebook will pay privately-held Oculus $400 million in cash and 23.1 million in Facebook shares, valued at $1.6 billion, as well as an additional $300 million if the acquisition achieves certain milestones.

Oculus, based in Irvine, California, makes a virtual reality headset called Oculus Rift which is yet to be released in the market, but has received a lot of attention from video game developers, who have ordered more than 75,000 prototype kits at $350 each. The kits are to ship in July.

But Facebook founder and CEO Mark Zuckerberg said that he is looking at Oculus beyond just gaming, "We're going to make Oculus a platform for many other experiences."

"Imagine enjoying a courtside seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face - just by putting on goggles in your home," he said in a post on Facebook.

Oculus, based in Irvine, California, was founded in 2012 by Palmer Luckey, an engineer at the University of Southern California Institute for Creative Technologies.

After Oculus demonstrated the Oculus Rift prototype at E3 in June 2012, it announced a Kickstarter campaign to further develop the product and raised $2.4 million.

It later raised more than $90 million from venture capitalists including Spark Capital Matrix Partners, Andreessen Horowitz, Formation 8 and Founders Fund. Marc Andreessen joined Oculus board in its latest round of fund raising.

Antonio Rodriguez, a board member at Oculus and general partner at Matrix Partners, said in an interview that Facebook intends Oculus to operate largely autonomously similar to its recent acquisitions like WhatsApp and the photo-sharing service Instagram.

The deal will put Facebook into the virtual reality technology market where it will compete with Google's Glass, and Sony's recently unveiled "Project Morpheus," a headset made to work with its PlayStation 4 videogame console.

(Read: CEO Mark Zuckerberg explains why Facebook invested in  Oculus)