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Liberty Interactive acquires HSN

July 7, 2017

John Malone-owned digital commerce business investor Liberty Interactive is to acquire the 62 per cent of  interactive multichannel retailer HSNi it does not already own in an all-stock transaction.

“We are excited to announce the acquisition of HSNi. The addition of HSN will enhance QVC’s position as the leading global video eCommerce retailer. Every year they together produce over 55,000 hours of shoppable video content and have strong positions on multiple linear channels and OTT platforms,” said Greg Maffei, Liberty Interactive President and CEO. “The value of the combined QVC, HSNi and zulily will be further highlighted when later this year QVC Group becomes an asset-backed stock as part of the previously announced split-off of Liberty Ventures.”

“We’re thrilled to welcome the HSNi team to our company ,” declared Mike George, QVC President and CEO. “HSNi founded the industry forty years ago and helped it grow with exciting initiatives like Shop By Remote and media integrations with leading content producers. By creating the leader in discovery-based shopping, we will enhance the customer experience, accelerate innovation, leverage our resources and talents to further strengthen our brands, and redeploy savings for innovation and growth. As the prominent global video commerce retailer and North America’s third largest mobile and eCommerce retailer, the combined company will be well-positioned to help shape the next generation of retailing.”

“Joining the QVC Group will give us instant access to global consumer markets, a leadership team with deep expertise and a global perspective, and the opportunity to further strengthen our content-based brand portfolios in a changing retail landscape,” said Arthur C. Martinez, HSNi’s Chairman of the Board of Directors. “We have both been innovators in a growing and dynamic retail environment with a unique vision of what shopping should be, and as new technologies continue to change our everyday lives, together we can develop the next generation of shopping for the next generation of consumers.”

Liberty Interactive believes the acquisition of HSNi will provide the following benefits:

  • Increase scale, enhancing the competitive position of QVC Group
  • Meaningful synergies through cost reduction and revenue growth opportunities
  • Increased development of eCommerce, mobile and OTT platforms
  • Optimise programming across five US networks
  • Cross marketing to better engage existing and potential customers
  • Financial optionality due to HSNi’s lower debt leverage

HSNi consists of HSN, a leading interactive multichannel retailer, and Cornerstone, which is comprised of leading home and apparel lifestyle brands including Ballard Designs, Frontgate, Garnet Hill, Grandin Road and Improvements. Post-closing, HSNi headquarters will remain in St. Petersburg and will be overseen by Mike George.

Liberty Interactive currently owns 38.2 per cent of HSNi and, under the definitive agreement will acquire the remaining 61.8 per cent stake, making it a wholly-owned subsidiary, attributed to the QVC Group tracking stock. 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 per cent 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 per cent of QVC Group’s undiluted equity and 6.9 per cent 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 acquisition of HSNi is expected to be completed by the fourth quarter of 2017. The completion of the acquisition is subject to certain customary conditions.

A voting agreement has been obtained from Liberty Interactive to vote its HSNi shares in-favour of the transaction. Approval of the Liberty Interactive stockholders is not required, and is not being sought, for the HSNi acquisition. Upon closing, the Liberty Interactive Board of Directors will be expanded by one to include a director from the HSNi Board of Directors; this director will be selected by Liberty Interactive.

The previously announced transaction between Liberty Interactive and General Communication, Inc. 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.

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