OUR TAKE

The rumor of a Walmart-Jet.com merger turned out to be true this morning, although the announced deal value of $3.3 billion was about 10% higher than expected. The deal looks good for both parties: Jet.com will take on a new, deep-pocketed owner that can support and fund its continued development. Walmart gets access to Jet’s management team, customer base and advanced e-commerce technology that should help it accelerate the growth of its e-commerce business. Consumers should continue to benefit, as both companies are devoted to offering low prices to their customers.

DETAILS ON THE ACQUISITION

Walmart and Jet.com announced today they have signed a definitive agreement under which Walmart will acquire Jet.com for approximately $3.3 billion in cash and stock, of which an unspecified amount will be paid over time. The acquisition, subject to regulatory approvals, has been approved by both boards and is expected to close by the end of this calendar year. Walmart commented the Jet.com acquisition will build upon the foundation already in place with the Walmart app, website and stores, and position the company for faster e-commerce growth. Although Walmart.com and Jet.com will maintain distinct brands, Jet.com’s CEO, Marc Lore, is expected to assume a senior management position at the combined entity, and Walmart’s top online executive, Neil Ashe is expected to leave the company, according to The Wall Street Journal. Lore’s commitment to stay on, likely for a longer term than the more than two years he stayed after Amazon’s acquisition of his prior company, Quidsi, was a requirement of the deal, according to a Bloomberg article.

BENEFITS FOR WALMART

In the deal, Walmart will get the benefits of the expertise of Jet’s management and its customer base and technology platform. Walmart characterized Jet’s key attractive points as follows:

• Demonstrated ability to scale with speed; the firm hit a $1 billion run-rate gross merchandise value (GMV) and offered 12 million SKUs in one year.
• Growing base of urban and millennial customers, which is growing by 400,000 on a monthly basis and averages 25,000 orders per day.
• Leading technology for minimizing shipping costs.
• More than 2,400 retailer and brand partners.

BENEFITS FOR CONSUMERS

Jet.com is likely to maintain its low-price mantra, with prices deliberately set below Amazon’s, at least through the close of the acquisition, and consumers are likely to continue to benefit from the merger of two companies dedicated to offering low prices to consumers. Please click here to read our recent report, “Walmart in Talks to Acquire or Invest in E-commerce Upstart Jet.com.”