Search for younger women: QVC to pay $2.4B for Zulily
West Chester TV shopping giant buys discounted Seattle smartphone shopper
West Chester-based home-shopping TV studio and warehouse distributor QVC says its parent company, Liberty Interactive Corp., has agreed to buy Zulily Inc., a Seattle-based, five-year-old smartphone-focused clothing-toy-gift-home decor retailer, for $2.4 billion, half in cash, half stock.
The move unites QVC, which is popular among middle-aged women, with Zulily, which targets younger "milennial moms and the digital-only generation," according to a QVC statement. Zulily says 56 percent of its orders, from 10,000 "vendor partners," are placed through smartphones and other mobile devices. QVC boss Mike George has been pushing toward online sales, and the company has for 20 years collected extensive customer and product data to link targeted customers and products.
The price works out to $18.75 a share, about a 50 percent premium to Zulily's recent stock market value, but just a quarter of Zulily's highest price last year, and a disappointing $3.25 discount to its initial public offering price in November 2013. Zulily shares have lost value as the company's recent relatively slow growth failed to justfiy sky-high investor hopes it could become a dominant retail player, the smartphone Amazon.com. One-sixth of Zulily shares are owned by Alibaba, the China-based ecommerce company whose share price has been battered recently. Second-largest owner is the Fidelity mutual fund group.
Combined, QVC-Zulily will create a "discovery-driven" shopping platform "with appeal that spans generations of women," and $10 billion in yearly sales, QVC said in a statement. Liberty Interactive employs around 17,000, of whom about 4,000 are based at the company's Studio Park headquarters near West Chester, its Lancaster County warehouse and other locations near Philadelphia; local employment has been flat for the past decade. Zulily employs around 2,900; facilities include a big 800,000 sq ft Bethlehem area warehouse that opened last year.
The companies expect to move 230 million merchandise units worth $10 billion to nearly 20 million customers in 85 countries this year. "Together, we will further engage modern women who love to shop in new and compelling ways," said QVC ceo Mike George in a statement. "We look forward to welcoming the talented zulily team to the QVC Group." The initial statement didn't mention cost cuts or consolidations between QVC's sprawling West Chester complex and Zulily's Seattle offices.
"There are tremendous opportunities to accelerate the growth of the Zulily brand for our customers, our employees, and our vendors with QVC's partnership," said Zulily boss Darrell Cavens in a statement. He said the companies have "complementary philosophies" and will grow faster combining "product lineup, brand portfolio, and vendor network" through their combined platforms, including Zulily's smartphone apps and realtime and historic data-based custom offerings and what QVC calls Zulily's "extraordinarily agile and efficient digital content production system," and QVC's customer analytics and "deep video expertise" as well as buyer financing.
QVC includes local-language services in several other nations, as is launching in France this month.
QVC also said CEO George is being appointed to the Liberty International Board of Directors, where he will join chairman and Liberty founder John Malone and Liberty Interactive CEO Greg Maffei. Zuilly's Cavens will report to George as well as to Malone and Maffei. Zulily cofounder Mark Vadon will join Liberty Interactive's main board of directors. The companies plan to close the deal by the end of the year.