Microsoft is buying LinkedIn for US$26.2 billion (NZ$37 billion), in one of the largest technology deals ever.
The offer of US$196 per share is a 49.5 percent premium on the price the professional social networking company last traded at before the deal.
LinkedIn's shares jumped 46.6 percent to $US192.22 in mid-morning trading in New York.
Microsoft's shares were down 2.7 percent in early trading.
Microsoft is trying to transform itself from a seller of Microsoft Windows software for home PCs to a seller of software on a variety of platforms and devices. But it has struggled to keep pace with the likes of Google and Apple.
LinkedIn has a network of more than 100 million monthly active users.
But its share price has fallen 40 percent in the past year, after trading as high as US$270 in early 2015. Analysts have been concerned the company's growth would slow.
Growth has slowed for its advertising revenue, which accounts for around 18 percent of LinkedIn's business.
Jeff Weiner will remain chief executive of LinkedIn, and will report to Microsoft chief executive Satya Nadella.
The deal, which will be funded by debt and needs regulatory approval, is expected to be finalised by the end of the year.
The deal has also prompted a surge in the share price of Twitter, with the stock rising by as much as 9 percent today. It is considered a likely takeover target.