Our Take

QVC’s move to fully acquire HSN should not be seen only as a move to consolidate, but also as an attempt to mount resistance against the growing threat posed by e-commerce giant Amazon. With televised shopping and broadcast-based retail phasing out, home-shopping operators have long realized the limitations of TV and have ventured into e-commerce. Such a move makes sense, but it has also put QVC and HSN head-to-head against Amazon. QVC has already established a sizable presence in e-commerce, so the acquisition allows it to tap into HSN’s experience in new shopping formats—HSN has successfully introduced augmented reality (AR) and gamification to its program. Whether the combined company can gain a foothold under the threat of Amazon hinges greatly on its ability to create a quality shopping experience. Online video and content generation will be a key area that the combined entity will likely focus on. Both QVC and HSN have stagnated in recent years in terms of growth. Although the acquisition provides positive catalysts for both companies, it remains to be seen whether these catalysts will be sufficient to drive the fight against Amazon’s dominance.

QVC Acquires the Remaining 62% of HSN

The parent company ofTV home-shopping giant QVC, Liberty Interactive Corp., announced the signing of a definitive agreement with rival HSN, which will see Liberty Interactive, which already owns 38% of HSN, acquire the remaining 62% stake in an all-stock transaction worth $2.1 billion. In the deal, HSN shareholders will receive a fixed consideration of 1.65 shares of Series A QVC Group common stock for every share of HSN common stock, which equates to $40.36 per HSN share and represents a 29% premium to HSN shareholders. As Liberty Interactive already owns 38% of HSN, once the deal is completed, HSN will become a wholly-owned subsidiary of Liberty Interactive. HSN CEO and Chairman Mike George said that the deal represents an opportunity for HSN to “strengthen our content-based brand portfolios in a changing retail landscape.” He also emphasized that HSN can now leverage the instant access to QVC’s global consumer markets as well as its experienced leadership team in “shaping the next generation of retailing.” The transaction is expected to close in the fourth quarter of 2017, subject to the approval of both the regulators and HSN shareholders.

Consolidation in the Home Shopping Market

The proposed deal would combine the two largest home-shopping companies in the US. QVC reported net sales of $8.7 billion in 2016, while HSN recorded $3.6 billion. The deal will see a combined entity with over $12 billion in sales, certainly a power house in the home-shopping market. According to Liberty Interactive, the acquisition of HSN will increase the scale of QVC and enhance its competitive position. Meaningful synergies exist between the two companies that translate into cost-reduction and revenue-growth opportunities. Meanwhile, the acquisition will greatly enhance QVC’s capability in e-commerce and mobile platform development, which will allow the combined entity to pursue growth opportunities online. Finally, HSN’s lower debt leverage provides QVC with substantial financial optionality.