This morning across the wires, direct-to-consumer retailer HSN (HSNI 40.00, +8.70 +27.8%) announced it agreed to be acquired by digital commerce firm Liberty Interactive (QVCA 24.34, -0.12 -0.49%) for $40.36 per share, or about $2.6 billion in total enterprise value.
As a bit of background, Liberty Interactive currently owns 38.2% of HSNI and, under today’s definitive agreement will acquire the remaining 61.8% stake, making it a wholly-owned subsidiary, attributed to the QVC Group tracking stock. The businesses and assets attributed to the QVC Group (QVCA, QVCB) consist of Liberty Interactive Corporation's subsidiaries, QVC, Inc. and zulily, llc, and its interest in HSNi, Inc., and the businesses and assets attributed to the Liberty Ventures Group (LVNTA, LVNTB 50.76, -0.66 -1.28%) consist of all of Liberty Interactive Corporation's businesses and assets other than those attributed to the QVC Group, including its interests in Liberty Broadband Corporation and FTD, Liberty Interactive Corporation's subsidiary Evite, and minority interests in ILG, Lending Tree and Charter Communications.
Per the deal, HSNI shareholders will receive fixed consideration of 1.65 shares of Series A QVC Group common stock for every share of HSNI common stock. Based on the Series A QVC Group common stock’s closing price as of July 5, 2017 and the number of HSNI undiluted shares outstanding as of May 1, 2017, this equates to a total enterprise value for HSNI of $2.6 billion, an equity value of $2.1 billion, and consideration of $40.36 per HSNI share, representing a premium of $9.06 per share or 29% to HSNI shareholders, based on HSNI’s closing price on July 5, 2017.
Liberty Interactive intends to issue 53.4 million shares of QVC Series A common stock to HSNI shareholders. Pro forma, QVC Group total undiluted share count will be 504.3 million, comprised of 474.9 million shares of Series A common stock and 29.4 million shares of Series B common stock, with former HSNI shareholders, excluding Liberty Interactive, to own 10.6% of QVC Group’s undiluted equity and 6.9% of the undiluted voting power, based on the number of shares outstanding as of April 30, 2017. Following the completion of the transaction, Liberty Interactive expects to continue its repurchases of QVC Group common stock.
The previously announced transaction between Liberty Interactive and General Communication, and subsequent split-off of Liberty Ventures is expected to close later in 2017. Simultaneous with that closing, QVC Group, including wholly-owned subsidiaries QVC, Inc., zulily and HSNi (or, if the HSNi acquisition has not yet closed, following such closing), will become an asset-backed stock and Liberty Interactive will be renamed QVC Group, Inc. Neither the GCI acquisition nor the HSNi acquisition is conditioned on the completion of the other, and no assurance can be given as to which of these transactions will be completed first.
The acquisition of HSNi is expected to be completed by Q4.