QVC Group Plucks Zulily in $2.4B Deal

Online Retailer Will Complement Home Shopping Giant
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QVC Group, the home shopping arm of Liberty Interactive, has agreed to purchase online retailer zulily in a deal valued at about $2.4 billion.

Liberty Interactive will acquire zulily for $18.75 per share – about $9.38 per share in cash and 0.3098 shares of Liberty stock for each zulily share. The purchase price represents a 49% premium to zulily's closing price Froiday of $12.57 per share. Funding for the cash portion of the deal is expected to come from cash on hand at zulily and QVC’s revolving credit facility.

The acquisition will be attributed to Liberty Interactive’s QVC Group tracking stock.

Zulily was formed in 2010 by Darrell Cavens and Mark Vadon, catering to young families and holding “flash” sales for clothing, home décor, toys and other products. The company went public in 2013 and counts Chinese e-commerce giant Alibaba Group as one of its larger shareholders, but has seen its sales sink in the face of stiff completion from Amazon and other online retailers. The stock has been down about 65% in the past 12 months, but was up 47% ($5.92 per share) to $18.49 each on Monday after the Liberty deal was announced.

“We are excited for zulily to join the Liberty family,” said Liberty Interactive CEO Greg Maffei in a statement.  “Darrell, Mark and their team have built an impressive business around entertainment, discovery and value to the customer, which fits perfectly with the QVC philosophy.  Combined under Liberty, we have an incredible opportunity to delight shoppers from the TV to the Internet.”

The deal is expected to be complementary to Liberty and help strengthen QVC’s position in experiential, discovery driven shopping.  QVC and zulily will be operated as separate consumer brands, but it is anticipated that the combination will help boost zulily’s global scale, vendor relationships and video commerce expertise, while QVC will benefit from a younger customer demographic, personalization expertise and e-commerce capabilities.

“As the world leader in video and e-commerce retail, QVC is dedicated to reimagining shopping, entertainment and community as one,” said QVC CEO Mike George in a statement.  “In zulily, we see a like-minded brand that shares our passion for discovering great products, for delivering honest value, and for building long term relationships with customers.  Our teams are committed to learning from and inspiring each other and leveraging our platforms in new ways to accelerate growth, serve our customers better, and realize the full potential of both of these extraordinary brands.”

Zulily will remain based in Seattle and Cavens, currently President and CEO, will remain in that role. George is being appointed to the Executive Committee of the Liberty Interactive Board of Directors and will serve on that committee with Liberty chairman John Malone and Maffei.  Cavens will report directly to George and the other members of the Executive Committee.  In addition, Vadon will join the Liberty Interactive Board of Directors.

“Mark Vadon and I are incredibly excited to announce our partnership with QVC.  QVC has built an amazing business with a great culture and incredibly similar understanding for bringing entertainment, discovery and value into the daily customer experience.” Cavens said in a statement.  “This combination under Liberty is about investing in our future and providing a tremendous opportunity to accelerate our platform for growth of the zulily brand through the partnership with QVC.”

The transaction has been approved by the boards of directors of both companies and should close during the fourth quarter. 

Baker Botts L.L.P. is acting as legal advisor for Liberty Interactive.  Goldman Sachs is serving as financial advisor for zulily and Weil, Gotshal & Manges LLP and Cooley LLP are acting as legal advisors.

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