Liberty Interactive Corporation (NASDAQ:QVCA) to Buy Zulily, Inc. (NASDAQ:ZU) for $2.4 Billion

PentairLiberty Interactive Corporation (NASDAQ:QVCA) announced that it would buy Zulily, Inc. (NASDAQ:ZU) for $2.4 billion. (Source: Liberty Interactive Corp, August 17, 2015.)

Liberty Interactive owns home shopping network QVC, which also has an online shopping site. Zulily is an e-commerce company specializing in limited time sales of clothing, toys, and home products. The acquisition would boost Liberty Interactive’s online presence and allow it to tap into Zulily’s younger client base.

“We are excited for Zulily to join the Liberty family,” said Liberty Interactive President and CEO Greg Maffei.  “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.”

Liberty Interactive would acquire all outstanding shares of Zulily for $18.75 per share, representing a 49.2% premium over Zulily’s closing price last Friday. This would value the company at $2.4 billion.

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After the news release, Zulily’s stock price surged 47.28% to $18.50 on Monday morning. Shares of Liberty Interactive dropped 1.85% to $29.70 apiece.

Liberty Interactive would pay $9.375 in cash and 0.3098 newly issued QVCA shares for each Zulily share. The cash part of the deal would be funded from cash on hand and QVC’s revolving credit facility.

Note that even with the huge premium in this deal, the price of the Zulily’s shares is still below its IPO price of $22.00 in November 2013.

Earlier this year, Alibaba Group Holding Limited (NYSE:BABA) took a 9.3% stake in Zulily when Zulily was trading below $13.00 apiece. The Chinese e-commerce giant is likely going to take home big profits in this deal.

After the acquisition by Liberty Interactive, Zulily’s headquarters would remain in Seattle. Moreover, Zulily’s management team, including its President and CEO Darrell Cavens, will remain as such.

The boards of directors of both Liberty Interactive and Zulily have approved the transaction. The deal is expected to close in the fourth quarter of 2015.