QVC to combine with rival HSN
John Malone is solidifying his hold on home-shopping channels — in his own particular way.
His Liberty Interactive Corp, which owns QVC, said on Thursday that it would combine with its longtime rival, the Home Shopping Network, in a $2.1 billion deal.
The deal will put together the two home-shopping television networks at a time of upheaval in the retail world. Amazon.com Inc’s dominance in selling online has grown seemingly non-stop, while Wal-Mart Stores Inc has made e-commerce a big priority with the purchases of startups like Jet and the clothing brand Bonobos.
With e-commerce ascendant, nearly everyone else in retailing, from venerable department stores to once-trendy clothiers like J. Crew, has been struggling to grow or even survive. A growing number of retailers, from American Apparel to Radio Shack, have filed for bankruptcy protection.
Home-shopping television networks are not immune from the online competition. With their familiar pitches for impulse purchases of electronics, jewellery, makeup and fitness equipment, both QVC and HSN are grappling with ways forward.
HSN’s sales declined 3% last year, while QVC’s have slowed. I n April, Mindy Grossman, HSN’s chief executive since 2008, left to run Weight Watchers International.
Combining QVC and HSN, which also have substantial e-commerce operations, is meant to help them gain scale, combine resources and cut costs.
QVC and HSN would remain standalone brands under a new QVC Group structure after the merger.
“The increased scale of this combination will allow us to more effectively compete, we think, in a changing and evolving retail and digital environment,” Gregory Maffei, chief executive of Liberty Interactive, said on a conference call with analysts on Thursday.
This being Malone, however, the deal has a few intricacies.
The deal is an all-stock transaction, where Liberty Interactive is technically buying the 62% of HSN that it does not already own.
Liberty Interactive then plans to spin off its non-retail assets, including its stakes in the cable operator Charter and Liberty Broadband, and rename the remaining operations the QVC Group.
That publicly traded company would comprise QVC, HSN and Zulily, the flash sale site that Liberty bought two years ago.
Such a spin-off is a classic Malone manoeuvre meant to avoid running up corporate taxes, since shareholders will receive shares in the newly christened QVC Group rather than a cash payout.
It is a tactic that he and Maffei have employed so frequently that Liberty Media, a related company that Malone also controls, has completely turned over its asset portfolio at least once.
HSN, based in St Petersburg, Florida, broadcasts to 95 million households in the United States via cable, as well as online streaming. It also sells home and apparel brands through its Cornerstone business, which markets products through catalogs, branded e-commerce websites, and 14 retail and outlet stores. The Cornerstone brands include Frontgate and Ballard Designs.
The company reported sales of $3.6 billion in 2016, and it employs about 6,900 people.
Under the terms of the transaction, investors would receive 1.65 shares of QVC Series A stock for each share of HSN they own. That would value HSN at $40.36 a share, a 29% premium to its closing price Wednesday.
HSN shareholders, other than Liberty Interactive, would own 10.6% of the combined business.
The transaction is expected to close in the fourth quarter and is subject to shareholder and regulatory approval.