QVC And Zulily Join Up: What's Next?

Before the market open on Monday, Liberty Interactive Corp QVCA announced its plans to acquire Zulily Inc ZU in a cash and stock transaction for $18.75 per share, which values the latter company at approximately $2.4B.

In a report published Tuesday, Brean Capital analyst Tom Forte said that the deal, which would be attributed to Liberty Interactive’s tracking stock, QVCA, was expected to close in 4Q15. “We are bullish on the transaction as it combines two companies that offer consumers differentiated merchandise and have large and loyal customer bases,” Forte wrote.

Brean Capital reiterated a Buy rating on QVCA, with a price target of $37. Forte added that offering consumers differentiated merchandise was “one of the keys” to competing against Amazon.com, Inc. AMZN “for the future of retail.”

Forte mentioned the implications that the deal had for other Consumer Technology stocks:

• QVCA was unlikely to acquire HSN, Inc. HSNI at least in the near term
• There may be additional M&A transactions in the e-commerce sector. Potential targets may include: Chegg Inc CHGG, Coupons.Com Inc COUP, Etsy Inc ETSY (Rated: Buy), GrubHub Inc GRUB (Rated: Buy), Overstock.com, Inc. OSTK, RetailMeNot Inc SALE, Shopify Inc SHOP, TrueCar Inc TRUE, and Wayfair Inc W. Private companies that could be potential targets include Airbnb, Bonobos, Delivery.com, Fanatics, Instacart, Jet.com, JustFab, Lyft, Pinterest, The Tie Bar, Uber, and Warby Parker.
• Other Potential Suitors: “First, the usual suspects, companies we would always consider to be on the hunt for an e-commerce deal to expand their efforts or complement their existing businesses:” Alibaba Group Holding Ltd BABA, Amazon, Apple Inc. AAPL (Rated: Buy), eBay Inc EBAY, Facebook Inc FB (Rated: Buy), Google Inc GOOGL, Groupon Inc GRPN (Rated: Buy), Nordstrom, Inc. JWN (Rated: Hold), Priceline Group Inc PCLN, Rakuten Inc (TYO: 4755), Wal-Mart Stores, Inc. WMT, Yahoo! Inc. YHOO, and Yelp Inc YELP (Rated: Buy). “Second, traditional retailers we believe could improve their efforts via e-commerce deals:” Kohl's Corporation KSS, Macy's, Inc. M, and Target Corporation TGT.

“One interesting footnote on this transaction is that Alibaba acquired a minority interest in Zulily, which currently stands at 17.0%,” the Brean Capital report added.