Are Zulily Shareholders Getting Enough in the QVC Buyout?

Retail

Published: August 17, 2015 12:20 pm

Liberty Interactive Corp. (NASDAQ: QVCA) as part of the QVC empire, moved to acquire Zulily Inc. (NASDAQ: ZU). Both companies announced that they have entered into a definitive agreement under which Liberty Interactive will acquire all outstanding shares of Zulily for $18.75 per share. The transaction has been approved by the boards of directors of both companies and is anticipated to close during the fourth quarter of 2015.

The deal values Zulily at $2.4 billion. Liberty Interactive has agreed to provide $9.375 in cash and 0.3098 of its newly issued shares for each Zulily share. Funding for the cash portion of the consideration is expected to come from cash on hand at Zulily and QVC’s revolving credit facility.

While QVC and Zulily will be operated as separate consumer facing brands, the collaboration creates numerous exciting opportunities, including leveraging QVC’s global scale, curation, vendor relationships and video commerce expertise at Zulily. At the same time, Zulily’s younger customer demographic, personalization expertise and e-commerce capabilities will boost QVC.

Following the close of the transaction, Zulily will remain based in Seattle and Zulily will continue to be run by its talented management team, with Darrell Cavens remaining president and CEO of Zulily.

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Mike George, president and CEO of QVC, commented on the acquisition:

As the world leader in video and eCommerce retail, QVC is dedicated to reimagining shopping, entertainment and community as one. 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.

It is worth mentioning that back in May Alibaba Group Holding Ltd. (NYSE: BABA) bought a 9.3% stake in Zulily, picking up the stock anywhere from $10 to about $13 per share. Considering this transaction, Alibaba’s stake is valued at roughly $223 million.

Practically speaking, any investors who bought into Zulily prior to February and have held since then are losing on this deal. However, investors similar to Alibaba, who purchased after February and held, made some decent gains with this deal.

Zulily came public in November 2012 at a $22 per share price target and surged to above the $70 mark at the beginning of 2014. However, since that time shares have fallen. Year to date, the stock was down about 46% as of Friday’s close and down 66% in the past 52 weeks.

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Shares of Zulily were up 47% to $18.50 on Monday. The stock has a consensus analyst price target of $13.13 and a 52-week trading range of $9.09 to $41.75.

Liberty Interactive shares were down 1.6%, at $29.78 in its 52-week range of $22.37 to $31.62. The consensus analyst price target is $35.74.

Shares of Alibaba were up 0.3%, at $74.96 in its 52-week range of $71.03 to $120.00. The consensus price target is $97.65.

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