Liberty Interactive's QVC Unit Acquires zulily for $2.4B

Yesterday, the QVC division of Liberty Interactive Corp. QVCA completed the pending acquisition of Seattle-based e-commerce company — zulily Inc. -- for $2.4 billion or $18.75 per share. zulily is a leading experiential, discovery driven shopping network offering services on televisions, the Internet, phones, PCs or laptops and mobile devices. Notably, the deal has been completed much earlier than anticipated, as it was originally expected to be closed in the fourth quarter of 2015.

Liberty Interactive paid $9.375 in cash and 0.3098 newly issued shares of QVCA for each zulily share. Incidentally, the companies will continue to function independently and the Internet retailer will even retain its current management. However, the collaboration creates several exciting opportunities as these two highly complementary companies look to benefit by pooling their sourcing, distribution and technological expertise.

Notably, in May 2015, Alibaba Group Holding Ltd. BABA bought a 9.3% stake in zulily. The company specializes in “flash sale” deals that are listed for up to 72 hours at a time and accounted for over $1 billion in net sales in 2014.

However, zulily had, of late, struggled to maintain its impressive growth, partly because of its unique business model. This is because the online retailer, in itself, holds a very limited amount of inventory, which delays shipping and causes delivery time lags of up to two or three weeks. Moreover, it has a no-return policy. Thus, zulily will leverage from QVC’s worldwide scale of operations, vendor associations and video commerce capabilities to boost its sinking fortunes.

From the perspective of QVC, zulily appears a solid acquisition. For one, both companies share similar selling methods, laying emphasis on impulse buying rather than planned shopping. Interestingly, zulily relies on a younger customer demographic of 24–45 year old mothers. The buyout will thus help QVC push into a younger target market, as the television commerce giant’s customers generally tend to be in the 35–55 age group.

Notably, QVC is a major e-commerce retailer in the U.S., competing with the likes of Amazon.com Inc. AMZN.  QVC owns a considerable stake in HSN Inc. HSNI, a leading home shopping retailer on the HSN television network and HSN.com. Liberty Interactive currently carries a Zacks Rank #3 (Hold).

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