Online retail giant QVC is reportedly acquiring flash sales site zulily for $2.4 billion in a cash-and-stock deal.
The acquisition, which comes almost two years after the struggling eCommerce company went public, is strategic for QVC’s growing efforts to build up its omnichannel reach and shift from its televised home-shopping approach, which has recently seen decline.
With the acquisition deal, zulily’s share value surged by almost 49 percent yesterday (Aug. 17) to $18.74. However, QVC is still acquiring the company at a discounted rate to its IPO price, which valued it at $22 per share in Nov. 2013, according to WSJ.
While the company touched its peak at $1 billion in annual sales last year, its fast-tumbling momentum came as its flash sales business model became a common sight among many online retailers, like Rue La La and Gilt.
However, with the advent of flash sales on eCommerce websites like that of Walmart and Amazon, smaller businesses like zulily are facing an ever-increasing competition in not just selling but also acquiring quality stock.
Zulily’s business model is based on offering heavy discounts on merchandise by limiting its inventory, buying stock directly from vendors after receiving orders and providing delivery in two to three weeks.
But with other eCommerce giants offering faster delivery time, ranging from same-day to a week, the company has seen business slip out of its grip.
QVC President and CEO Mike George said the deal would help the two companies accelerate growth, improve customer service and realize full potential.
Post-acquisition, the two companies would be held under the common ownership of Liberty Interactive, the parent company of QVC. Meanwhile, Seattle-based zulily would still be managed by its current CEO and President Darrell Cavens.
“I am staying on and look to be here for a very long time,” Cavens said in an interview with WSJ. The company is now focusing its efforts on cutting down delivery time, he added.
The acquisition is expected to benefit some of zulily’s prominent shareholders like Andreessen Horowitz and Alibaba Group Holding Ltd., which bought a 9.3 percent stake in the company when the stock was trading at less than $13 a share, WSJ reported.