Acquisition of zulily
On August 17, 2015, Liberty Interactive (QVCA) announced its acquisition of Zulily (ZU) for $2.4 billion. Liberty Interactive will purchase all of Zulily’s outstanding shares for $18.75 per share. Zulily’s stock price rose by 49% after the announcement of the acquisition. The acquisition is expected to close in 4Q15.
Zulily is an online retailer. It’s known for its daily flash sales for women and children’s clothing. As the above chart indicates, the combined entity would have an annual revenue of $10 billion. It would have access to 19 million customers in 85 countries.
Liberty Interactive’s QVC is a shopping network that markets and sells its products through live television programming, a mobile platform, and its website. Cable networks like Comcast (CMCSA) and Time Warner Cable (TWC) distribute QVC’s televised shopping programs for a carriage fee per subscriber. However, with the recent fall in pay-TV subscribers it makes sense for QVC to explore new options.
QVC is developing its mobile platform and website to increase customer engagement. It’s receiving a good response as indicated by its 2Q15 results. QVC’s mobile orders were 49% of its total e-commerce orders in 2Q15.
Reason for the Zulily acquisition
QVC’s products target primarily women who are 35–64 years old. In contrast, Zulily primarily targets Millennial women who are 25–45 years old. This acquisition would help QVC widen its customer base and gain access to women in this age group.
Zulily’s acquisition would strengthen QVC’s mobile user base. It’s important to note that 50% of the e-commerce orders could be on mobile for the combined entity. Another reason is that Zulily has proprietary personalization tools that strengthen the end user experience. These tools offer a set of curated products or brands that would be most relevant to each customer. This acquisition would give QVC access to these proprietary technologies.
Since there’s a minimal overlap of customers and vendors between the two companies, this acquisition would allow the combined entity to cross-sell its products to a broad customer base across multiple platforms.
You can get diversified exposure to Liberty Interactive by investing in the PowerShares QQQ Trust Series 1 ETF (QQQ). It holds 0.26% of the stock.