Liberty Interactive Corp (NASDAQ:QVCA) To Acquire Zulily (ZU) To Fight Competition From Amazon And Other E-Tailers
Liberty Interactive Corp (NASDAQ:QVCA) has stepped forward to acquire Zulily Inc (NASDAQ:ZU) at nearly a 49% premium. Part of the reason Liberty is interested in Zulily is that it wants to tap a younger clientele and expand its presence in mobile. The other reason is that Liberty hopes the acquisition will bolster its competitive edge against Amazon.com, Inc. (NASDAQ:AMZN) and others. Recently, growth has seemed to be cooling at Zulily and Liberty will have to bring back that growth to earn maximum benefit from the deal.
Liberty Interactive Corp (NASDAQ:QVCA) is offering to take over Zulily at $18.75 a share in cash and stock, for a total of $2.4 billion. The per share price being offered for Zulily represents about a 49% premium to the closing price immediately before the offer was announced.
Zulily is a fairly young business, mostly involved in flash sales of items like clothing for children and women. The company boasts a strong base of young customers and it also has a strong mobile presence. The fact that there is almost no overlap between the business of Zulily and QVC also makes the buyout an interesting one. Liberty hopes to combine Zulily with its maturing home shopping network QVC.
$10 billion in annual revenue
If the deal goes through as expected, the combined entity of QVC and Zulily is expected to have annual revenue of $10 billion. QVC has both online and offline operations, with 40% of its revenue coming from e-commerce. By acquiring Zulily, Liberty also hopes to improve its competitive advantage against Amazon and other flash sales retailer Rue La La.
Liberty Interactive Corp (NASDAQ:QVCA) will be getting its hands on Zulily at the time when the flash sales e-tailer is facing slow growth. To gain maximum value from its investment, Liberty will have to reignite growth at Zulily.
After the deal is closed, Darrell Cavens is expected to continue running Zulily as its CEO, and the business is also expected to retain its headquarters in Seattle. The deal is expected to close in the fourth quarter of 2015. Alibaba Group Holding Ltd (NYSE:BABA) owns 9% of Zulily.
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