Deal for $2.3B to tie Zulily to QVC

NEW YORK -- Zulily, which offers short-term sales of products such as toys and children's clothing geared to young moms, now has a parent.

Liberty Interactive Corp. which owns home shopping network QVC, announced Monday that it's buying Zulily in a cash-and-stock deal valued at approximately $2.32 billion. The deal will create a company with combined revenue of more than $10 billion and 230 million products shipped globally to 19 million customers in 85 countries.

QVC will be better able to reach younger shoppers while Zulily hopes to pump up sales growth, which has slowed. Zulily's sales topped $1 billion last year, but its shares have been in decline since February 2014.

The per-share price paid by QVC is below the $22 Zulily got during its initial public offering in November 2013, and far lower than the $73.50 that company shares hit a short time later.

Liberty Interactive Corp. will pay $9.375 in cash and 0.3098 newly issued shares of QVCA for each Zulily share. The transaction is valued at $18.75 per share. That's a 49 percent premium to Zulily's Friday closing price of $12.57.

The companies put the transaction's value at $2.4 billion.

Zulily's shares rose nearly 50 percent, or $5.93, to $18.50 Monday.

Alibaba Group Holding Ltd., the Chinese e-commerce giant, disclosed a 9.3 percent stake in Zulily in May.

The acquisition comes at a challenging time for "flash sales" sites, which began to pop up right when the recession hit. As the housing crisis went into full swing and the labor market was upended, operators like the Gilt Group would buy the excess inventories of retailers who could no longer sell the volume of goods that they once had and then offer them at low prices for a short period of time.

Inventory levels have since equalized, however, and retailers have grown more mindful of the amount of goods they keep warehoused.

Flash sites are now competing with big names such as TJX Cos., which has the clout to work with suppliers that the smaller flash sites do not.

"[Flash sales sites] peaked in the recession and it's been challenging ever since then," said Forrester analyst Sucharita Mulpuru. "Everybody thought the supply of inventory would be infinite."

Companies that run such online flash sales now are adjusting, with gimmicks such as themed sales to generate interest.

Zulily has a network of 10,000 vendor partners and offers thousands of products. About 56 percent of its orders are placed over mobile devices.

Moody's said both brands should benefit from combined sourcing, distribution and technology.

Zulily Inc. will keep its headquarters in Seattle, with Darrell Cavens remaining as chief executive. The company will become part of the QVC Group, which includes QVC Inc. and its interest in HSN Inc.

The boards of both companies have approved the deal, which is targeted to close in the fourth quarter.

In a conference call to discuss the deal, executives at the companies said the five-year-old Zulily and QVC have much in common. Both are about discovery-based shopping, meaning customers come not knowing what they're going to get, they said.

Information for this article was contributed by Cecile Daurat and Gerry Smith of Bloomberg News.

Business on 08/18/2015

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