PHILADELPHIA — Video-shopping network QVC and the Home Shopping Network will merge in an effort to better compete against Amazon and Walmart, as more consumers stop watching cable TV and do their shopping online.
The combined company will be the third-largest U.S. electronics retailer and will be large enough to be listed on the Standard & Poor's 500 index, according to Greg Maffei, CEO of Liberty Interactive Corp., the holding company built by cable TV pioneer John Malone that controls QVC.
QVC, based outside Philadelphia, plans to acquire the 62 percent of St. Petersburg, Florida-based HSN it doesn't already own, the companies said in a statement Thursday. Denver-based Liberty is to be renamed QVC Group after the deal's scheduled closing later this year. QVC boss Mike George will run both brands, including the three QVC channels and the two HSN channels and their online and mobile shopping services.
The companies plan to cut at least $75 million in yearly spending by eliminating any duplication in management, administrative and information technology spending, Maffei told investors.
Two years ago, QVC, which employs more than 4,000 workers in southeastern Pennsylvania, bought Seattle-based mobile-shopping network Zulily.
The all-stock purchase announced Thursday is valued at $2.1 billion, or around $40.36 a share. That's a nearly 30 percent premium to HSN's recent stock value but far below the company's 2015 high of over $74 a share. Liberty will also take on around $500 million in HSN debt.
Liberty initially rose in trading Thursday, but shares dropped below Wednesday's levels in the afternoon. HSN shares rose sharply to approach the sale price.
HSN was the original U.S. home shopping channel, founded in 1977.
QVC is now larger, with around 8 million regular customers and 183 million boxes shipped last year, compared with 5 million customers and 50 million packages for HSN. The companies estimate the shopper counts include 2 million people who are active at both companies. Combined, they expect sales to total $14 billion a year. Employment will total 27,000 before merger-related layoffs.
Both QVC, which is especially dependent on women's clothing, and HSN, which sells more electronics and operates the Cornerstone group of retail brands, have lately faced weak sales and job cuts as the three QVC video networks and HSN's two channels have faced stiff competition, especially from Amazon, with more shoppers moving online.
HSN boss Rod Little told investors that his company "was not happy with its performance" and hoped that combining with QVC would make the business stronger.
QVC's George said the combined company would be "well-positioned to help shape the next generation of retailing." The acquisition would allow the company to boost its scale, spur development of its mobile and online platforms, and optimize its programming, cross-marketing and finances.
Plans for the rivals to merge were proposed and then canceled in the past and rumored at times over the years. Maffei said it was time to do the deal because QVC's share price has lately strengthened relative to HSN's. Still, the deal will take a few years to boost profits, he acknowledged.
--Tribune News Service