QVC owner Liberty Interactive agrees to buy Zulily for $2.4B

Zulily will become part of QVC but retain its brand; the news sent Zulily's stock soaring over 48%

After going public less than two years ago, e-commerce company Zulily is already coming off the market.

The company has entered into a definitive agreement to be purchased by Liberty Interactive Corporation, the owner of home shopping network QVC, it was announced on Monday.

Liberty Interactive agreed to provide $9.375 in cash and 0.3098 newly issued shares of QVCA for each share of Zulily.  Funding for the cash portion of the consideration is expected to come from cash on hand at zulily and QVC's revolving credit facility.

The deal values Zulily at $2.4 billion, higher than its current market cap of $1.57 billion.

Founded in 2009, Zulily is online store targeting moms shopping for apparel and gear for babies and kids. The company relied on a "flash-sales" model, in which a company puts items on sale for a set period of time, then sends emails to its registered users informing them of what has been discounted.

The transaction has been approved by the boards of directors of both companies and is anticipated to close during the fourth quarter of 2015. Once it does, Zulily will be merged with the QVC brand, though it will retain its own brand.

For QVC, the company gains access to Zulily's younger demographic, and its expertise with e-commerce. For Zulily, it gets access to QVC's reach and bigger audience.

"QVC has built an amazing business with a great culture and incredibly similar understanding for bringing entertainment, discovery and value into the daily customer experience," Darrell Cavens, President and CEO of Zulily, said in a statement,  "This combination under Liberty is about investing in our future and providing a tremendous opportunity to accelerate our platform for growth of the Zulily brand through the partnership with QVC."

Not much will be changing for Zulily going forward. The company will remain headquartered in Seattle, and it will continue to be headed by the same management team, with Cavens remaining in his current position.

As per the deal QVC CEO Mike George has been appointed to the Executive Committee of the Liberty Interactive Board of Directors and will serve on that committee with John Malone and Greg Maffei. Cavens is going to be reporting directly to the Executive Committee.  Mark Vadon, co-founder of Zuliliy, will joining the Liberty Interactive Board of Directors as well.

Zulily is coming off a strong quarterly earnings report, in which it saw EPS of 6 cents per share on revenue of $297.56 million, a 4% year-to-year increase. It beat analyst expectations of earnings of 4 cents per share on revenue of $294.32 million.

However the company has been struggling with its growth recently, and in May it was forced to cut its revenue forecast for both the upcoming quarter and the full year, leading it to be downgraded by numerous analysts. 

Up to Friday's close, Zulily's stock had fallen about 43 percent from its $22 IPO price in 2013, ending trading at $12.57 a share.

Zulily's investors are absolutely ecstatic over the news of the acquisition, sending the stock into the stratosphere. It is currently up 48.53%, or $6.10, to $18.67 a share.

Liberty's investors are not quite as happy, though, and that stock has actually dipped 1.43%, or $0.43, to $29.83 a share on Monday.

(Image source: zulily.com)