Zulily Shares Soar 50% on Takeover Bid

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Zulily, inc. (NASDAQ:ZU) shares soared nearly 50% on the NASDAQ exchange today after a joint announcement today that it will be acquired by Liberty Interactive Corp. (NASDAQ:QVCA), the owner of the popular home shopping network, QVC, for a sum of $2.4 billion.

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Zulily is an online retailer based in in the United States. The company markets men’s, women’s, and children’s apparel, accessories, and shoes; children’s merchandise, such as infant gear, sports equipment, toys, and books; and other merchandise comprising kitchen accessories, home décor, entertainment, electronics, pet accessories, and health and beauty products. The company targets mothers with a flash sales model via both desktop and mobile websites and apps.

It was just a few days ago, 08 August that Zulily released its Q2 and H2 operating results which disappointed with rising revenues offset by increasing operating expenses. The company suffered a disappointing 29.6% decline in quarterly pre-tax profit, down to $5.45 million from $7.75 million year-on-year. Half year pre-tax profit declined 76% year on year.

Zulily shares have declined nearly 70% in the past 12 months, closing on 14 August at $12.57. Its shares opened this morning at 18.63 and have remained in that vicinity the entire day. At 4:00 p.m. EDT shares were holding at 18.81. Nearly 41 million shares were traded today, far beyond that average of 2.0 million per day. The purchase offer is $18.75 per share. It is worth noting that the price, although a 49% premium on Zulily shares as of Friday, is nonetheless, less than the company’s IPO of $22.00 per share.

The pairing of the companies seems to be an excellent fit as, according to CEO Darrell Cavens, Zulily is an internet version of the QVC television model. Other aspects of Zulily’s services, however, have not found favor with its customers.

  • Flash sales means inconsistent pricing
  • Delivery times have consistently been as long as three weeks
  • The company has an absolute policy of no returns

Expect some changes to the current model. With Amazon, Zappo’s and others delivering within one to two days, the internet retailing model must meet the standard set by the leader or fade into oblivion. The Liberty/QVC acquisition should prevent the latter from actually happening.

This may be more of a salvation than an acquisition. The combined companies will have an annual revenue of close to $10 billion.

Image courtesy of sixninepixels at FreeDigitalPhotos.net

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