E-com­merce pur­chase

The com­bi­na­tion gives them the scale they need to take on es­tab­lished com­peti­tors such as Ama­zon, Wal­mart.

The Denver Post - - FRONT PAGE - By Damian J. Troise

Lib­erty In­ter­ac­tive Corp. is tak­ing con­trol of the Home Shop­ping Net­work for about $2.6 bil­lion in stock. »

Dou­glas County’s Lib­erty In­ter­ac­tive Corp., QVC’s par­ent com­pany, is tak­ing con­trol of the Home Shop­ping Net­work for about $2.6 bil­lion in stock to cre­ate what will be the third-largest e-com­merce com­pany in the United States.

The com­pa­nies long known as bases for home shop­ping on TV had been deal­ing with slug­gish sales as Ama­zon dom­i­nates on­line. Both had long moved be­yond ca­ble chan­nels and were try­ing to re­fash­ion them­selves for younger shop­pers buy­ing more on their mo­bile phones.

“They’re a lit­tle bit late to the dance of the on­line arena, but are catch­ing up now,” said Craig Johnson, the pres­i­dent of Cus­tomer Growth Part­ners, a re­tail re­search con­sult­ing firm.

The com­bi­na­tion will help give QVC and HSN the scale they need to take on more es­tab­lished on­line com­peti­tors. A key fo­cus will have to be of­fer­ing unique, exclusive prod­ucts at a com­pelling value. Oth­er­wise, he said, com­peti­tors in­clud­ing Ama­zon and Wal­mart will be tough to beat on­line.

Lib­erty In­ter­ac­tive al­ready owned 38 per­cent of HSN. In­te­grat­ing them will make them “stronger than they are in­di­vid­u­ally and stronger yet as a stand-alone en­tity” in a “chang­ing and dif­fi­cult mar­ket,” said Greg Maf­fei, Lib­erty’s pres­i­dent and CEO.

Un­der for­mer CEO Mindy Gross­man, HSN had worked to build its e-com­merce pres­ence and trans­form it­self into a life­style net­work. It de­rives half its rev­enue from e-com­merce, fea­tur­ing more than 50,000 prod­ucts on its web­site along with broad­cast­ing to more than 90 mil­lion house­holds. Gross­man de­parted for Weight Watch­ers this year.

Ex­ec­u­tives on Thurs­day high­lighted the po­ten­tial for cost sav­ings, com­ple­men­tary but not wholly over­lap­ping cus­tomers,

their strength in video and the larger reach the two will have. The com­pa­nies also said they hope to use Zulily, which QVC bought in 2015, to drive younger cus­tomers to both brands.

Com­bined, they will serve an es­ti­mated 23 mil­lion cus­tomers world­wide and ship more than 320 mil­lion pack­ages ev­ery year, said Mike Ge­orge, QVC’s pres­i­dent and CEO.

QVC is stronger in fash­ion and beauty, Ge­orge said, while cred­it­ing HSN in ar­eas such as elec­tron­ics, fit­ness and health.

He also noted the com­pa­nies’ so­cial me­dia pres­ence and in­creas­ing e-com­merce sales, with about $7.5 bil­lion, and $4.7 bil­lion in sales from mo­bile de­vices. In terms of video reach, the two will ac­cess more than 360 mil­lion TV homes glob­ally.

Among re­tail­ers who op­er­ate in mul­ti­ple cat­e­gories, Ge­orge said, the com­bined com­pany will rank No. 3 in North Amer­ica in e-com­merce, as well as in mo­bile com­merce in the U.S., and be­hind only Ama­zon and Wal­mart in dol­lar value of trans­ac­tions.

The com­pany said the deal will mean be­tween $75 mil­lion and $110 mil­lion in cost sav­ings over the next three to five years. An analysis from Citi had sug­gested cost sav­ings of up to $100 mil­lion a year. In the near term, though, it ex­pects the cost sav­ings to be small.

Lib­erty In­ter­ac­tive will is­sue 53.4 mil­lion shares of QVC Se­ries A com­mon stock to HSN share­hold­ers. It said Thurs­day that is the equiv­a­lent of pay­ing $40.36 per share for HSN Inc. of St. Peters­burg, Fla. Shares of HSN surged $8.40, or 27 per­cent, to close at $39.70.

The deal is ex­pected to close in the fourth quar­ter.

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