This article originally appeared on Fortune.com.
QVC’s parent company is buying arch-rival Home Shopping Network for $2.1 billion to better battle rivals in the rise of e-commerce.
The acquisition, announced on Thursday, will bring together two companies that have long sold items such as jewelry, clothing, and electronics on television but have more recently pivoted more toward e-commerce and some stores. The combined company, whose two components rang in a combined $6 billion in online sales in 2016, or roughly half their revenue (46% at QVC and 52% at HSNi), will be the third largest e-commerce player in North America after Amazon.com and Walmart.com, according to eMarketer data.
Billionaire investor John Malone’s Liberty Interactive already owns 38% of HSN and will buy the remaining 62% of shares in the all-stock deal. Both QVC and HSN will remain separate brands even after Liberty Interactive to spins off its cable business following the deal’s closing into an independent entity to be called QVC Group. (Last year, QVC’s revenues came to $10.2 billion, or almost three times those of HSN.) That unit will also include flash-sale website Zulily, which QVC bought nearly two years ago for $2.4 billion, and HSN’s Cornerstone division.
The transaction comes at a challenging time – HSN’s sales fell 3% in 2016 and its profit slipped three years ago. What’s more, HSN’s corner office has been vacant since April, when longtime CEO Mindy Gross left to take the reins at Weight Watchers International.
(The company has since been led by three executives who make up the Office of the Chief Executive.) And QVC’s growth has slowed. Though QVC and HSN have been spared the turmoil afflicting brick-and-mortar retail, the companies have nonetheless still faced intense competition from Amazon et al.
The joining of forces of the decades-long foes is aimed at lowering costs (as much as $110 million a year in three to five years from now) and having bigger scale, particularly in the use of online videos like product demos to make online sales. That is all the more crucial given that a growing number of Americans are “cutting the cord,” or canceling their cable, a longer term threat given that the both companies’ typical shoppers skew a bit older. Some 104 million U.S. households have QVC, while about 91.1 million households have HSN channels, according to company filings.
“The addition of HSN will enhance QVC’s position as the leading global video e-commerce retailer,” said Greg Maffei, the president and chief executive of Liberty Interactive in a statement. He noted that QVC and HSN produce 55,000 hours of video content a year combined. The two brands offer a total of 4,200 brands and have some 23 million active shoppers, the vast majority of whom are women between 35 and 64 years.
Under terms of the deal, set to close in late 2017, HSN shareholders will get 1.65 shares of QVC’s Series A stock for each share of HSN. The companies said the offer values each share of HSN at $40.36, or a 29% premium over Wednesday’s closing stock prices.
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