QVC owner Liberty Interactive buying Zulily in a cash-and-stock deal valued at about $2.3B

NEW YORK, N.Y. – Zulily, which offers flash sales of products like toys and children’s clothing geared to young moms, now has a parent.

Liberty Interactive Corp. which owns home shopping network QVC, announced Monday that it’s buying Zulily in a cash-and-stock deal valued at approximately $2.32 billion. The deal will create a company with combined revenue of more than $10 billion and 230 million products shipped globally to 19 million customers in 85 countries.

QVC will better be able to reach younger shoppers while Zulily hopes to pump up sales growth, which has slowed. Zulily’s sales topped $1 billion last year, but its shares have been in decline since February 2014.

The per-share price paid by QVC is below the $22 Zulily got during its initial public offering in November 2013, and far lower than the $73.50 that company shares hit a short time later.

Liberty Interactive Corp. will pay $9.375 in cash and 0.3098 newly issued shares of QVCA for each Zulily share. The transaction is valued at $18.75 per share. That’s a 49 per cent premium to Zulily’s Friday closing price of $12.57.

The companies put the transaction’s value at $2.4 billion.

Shares of Zulily’s shares rose nearly 50 per cent, or $5.93, to $18.50 Monday.

The acquisition comes at a challenging time for flash sales sites, which began to pop up right when the recession hit. As the housing crisis went into full swing and the labour market was upended, operators like the Gilt Group would buy the excess inventories of retailers who could no longer sell the volume of goods that they once had.

Inventory levels have since equalized, however, and retailers have grown more mindful of the amount of goods they keep warehoused.

Flash sites are now competing with big names like TJX Cos., which has the clout to work with suppliers that the smaller flash sites do not.

“(Flash sales sites) peaked in the recession and it’s been challenging ever since then,” said Forrester analyst Sucharita Mulpuru. “Everybody thought the supply of inventory would be infinite.”

Companies that run such online flash sales now are adjusting, with gimmicks like themed sales to generate interest.

Zulily has a network of 10,000 vendor partners and offers thousands of products. About 56 per cent of its orders are placed over mobile devices.

Moody’s said both brands should benefit from combined sourcing, distribution and technology.

Zulily Inc. will keep its headquarters in Seattle, with Darrell Cavens remaining as CEO. The company will become part of the QVC Group, which includes QVC Inc. and its interest in HSN Inc.

The boards of both companies have approved the deal, which is targeted to close in the fourth quarter.