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HSN acquired by rival retail giant QVC for $2.1 billion

ST. PETERSBURG — The parent company of the shopping network giant QVC Group is acquiring St. Petersburg-based HSN, the digital and TV retailer best known as the modern-day version of the iconic Home Shopping Network.

Liberty Interactive Corp., the Englewood, Colo.-based parent company of QVC, announced the $2.1 billion deal Thursday morning. Liberty already owned a 38 percent stake in HSN. Even though QVC is clearly the larger, more profitable television retailer of the two brands, the merger indicates dismal times for television shopping, as viewership slips and both companies scramble to turn their business models into digital, online strategies.

"By combining forces we'll be able to accelerate our personalization and innovation," Mike George, president and CEO of QVC, said in an interview with the Tampa Bay Times.

GROSSMAN LEAVES HSN: CEO for 11 years to head Weight Watchers

QVC officials said the deal will bolster revenues for both companies as they'll share resources to strengthen their ecommerce platforms and digital operations. The sale is expected to close in the fourth quarter of this year.

It's likely that the new ownership will affect some HSN employees, said Rod Little, HSN's chief financial officer, on an investor conference call Thursday. Little did not elaborate on how many employees could be laid off or when.

QVC and HSN will operate as separate brands. However, QVC's George, will oversee HSN operations. It's likely HSN will still have its own management team in place, similar to Zulily, an online fashion brand Liberty Interactive bought in 2015 for $2.6 billion. HSNi's board of directors will be dissolved, though one HSN director will be appointed to the Liberty Interactive board at closing.

"We're going to kind of work together on (HSN leadership plans)," George said. "We don't have any specific organizational plans to discuss at this point."

HSN's headquarters will remain in St. Petersburg.

The future of HSNi's Cornerstone Brands, a portfolio of ecommerce and catalog businesses like Ballard Designs and Garnet Hill, is uncertain. Executives on an investors' call hinted at a possible sale in the near future, but George said in an interview with the Times that Cornerstone is "an important part of the portfolio."

George said during the call that QVC and HSN will compliment one another and play on each other's strengths.

"We're taking full advantage of sharing best practices," George said, noting that the goal is to create a platform where shoppers buy across channels. QVC and HSN, which are best known for their live television broadcast style of selling merchandise, have struggled in recent years to remain relevant. QVC's stronghold has always been fashion and beauty, whereas HSN's focus is on electronics, fitness and health. Both companies have invested substantially in its digital operations to better compete with online merchants, like Amazon and others, as television viewership declines. HSN sales declined 3 percent last year.

MORE: The internet finds the humor in QVC buying HSN

"When companies merge, it doesn't always create a win-win situation," said Budd Margolis, a TV shopping consultant based in London. "Both of these companies are very conservative. And whenever they change anything, the customer will instantly react. Maybe they can cross-promote between themselves, but their customers aren't necessarily discriminant. It's like people who like Burger King or McDonalds. They're loyal to their brand."

While HSN and QVC have relied heavily on its partners, brand names and celebrities that help build their brand's credibility, the two companies have not been immune to the challenges nearly all retailers face these days. They too are struggling to compete with nimble, digital competitors like Amazon and others that continue to surge ahead in sales and innovation.

"HSN is very vulnerable in this deal," Margolis said. "But both companies need to be more aggressive and innovative if they want to survive. Amazon is a tremendous threat. Everyone was blaming the election for the decline in sales last year, but in reality, their format hasn't changed in so long and there are new customers out there that they're behind in trying to reach. HSN and QVC need to become much more compelling if they want to reach them."

But some analysts think it might be too late for that.

"The consumers who buy on TV aren't the ones who buy online," said Britt Beemer, chairman and CEO of America's Research Group, a consulting firm. "The youngest consumers don't know who they are at all, so their interest has been minimal. They're going to have to develop a whole new strategy to reach them if they want to expand their online discovery base."

Previous Coverage:HSN executives seek digital solution to TV, shopping challenges

The timing of the sale was crucial. HSN's struggling performance over the year plus the recent departure of CEO Mindy Grossman to become president and CEO of Weight Watchers International Inc. combined to make this a prime time for an acquisition, said Greg Maffei, Liberty president and CEO.

During her 11-year tenure at HSN, Grossman orchestrated its conversion to a publicly held company in 2008. HSN's financial performance has suffered in recent years, however, and its market value has tumbled to half its peak price as retail stores close and shopping habits change rapidly.

"Now is the right time to join forces with QVC," Little said. "We will share resources, ideas and better leverage sales channels in new ways. This will benefit our customers and accelerate our growth trajectory faster."

Stock in HSN quickly rocketed up nearly 35 percent on the news reaching $42 a share, or up $10.70 apiece, by 9:30 a.m. Its shares closed at $39.70, up about 27 percent.

With 6,000 employees, including 2,500 in St. Petersburg, HSN ranks among Tampa Bay's largest public companies. Combined, Liberty Interactive's companies — HSN, QVC and Zulily — will reach $14 billion in revenue, 23 million global customers, and 2 billion visits to its various websites, with a reach of over 360 million households.

Liberty executives say the size and scope of the company, after the HSN sale, will put it in line behind mega retailers Amazon and Walmart in terms of reach.

Contact Justine Griffin at [email protected] Follow @SunBizGriffin on Twitter.

HSN Acquisition By The Numbers:

HSN:

95 million households reached

5 million customers annually

6,000 employees, including 2,500 in St. Petersburg

14 retail and outlet stores

$3.6 billion revenue in 2016

90 percent of sales come from repeat customers

$72,000 is the median household income

360 million households reached

8 million customers annually

17,000 employees, plus 3,000 at Zulily.

$8.7 billion in revenue in 2016

Broadcast operations in the U.S., Japan, Germany, UK, Italy, France and a joint venture in China. International was nearly 30 percent of net revenue in 2016.

92 percent of sales come from repeat customers

No. 3 mobile retailer in the U.S., the No. 8 mobile retailer globally, and the No. 4 ecommerce player in North America, according to Internet Retailer.

Companies combined under Liberty Interactive umbrella: (HSN, QVC and Zulily)

$14 billion in revenue : $7.5 billion in ecommerce & $4.7 billion in mobile

360 million households reached

145-plus hours of live content created per day

27,000 employees in 8 countries

Facts about HSN:

Its predecessor company, the Home Shopping Network, was one of the first ecommerce retailers in 1994.

• HSN developed the "Shop by Remote" program in 20 million homes. Programs are now available on Apple TV, Amazon Fire and Roku. Speciality shopping channels are also available for consumers on Samsung LG Smart TV and TiVo

• Leading brands include: Joy Mangano's Ingenious Designs, Andrew Lessman's ProCaps Laboratories, IMAN Global Chic, Jennifer Flavin-Stallone's Serious Skincare, Wolfgang Puck Kitchen, Diane Gilman.

History of HSN

July 1977: The over-the-air shopping concept that would become Home Shopping Network begins as a Clearwater radio show selling goods traded in return for advertising.

At WWQT-AM 1470, an advertiser offers the station 112 electric can openers in lieu of payment. A talk show host sells the can openers on-air, priced at $9.95. All 112 sell in about an hour. The station soon begins a daily, five-minute product-selling segment called the Suncoast Bargaineers.

1982: Radio station owner Lowell "Bud" Paxson moves the show to television on Tampa Bay's Vision Cable for three hours a day, calling it the Home Shopping Channel.

1985: The company changes its name to Home Shopping Network and begins broadcasting nationwide, 24 hours a day.

May 1986: Home Shopping Network's stock goes public. Priced at $18 for its initial public stock offering, the stock closes the first day of trading at $42.62 per share.

January 1987: Stock peaks at $47 a share.

July 1989: Home Shopping reports its first quarterly loss as a public company.

August 1990: HSN surpasses the $1 billion mark in annual sales for the first time.

December 1990: Paxson, president and co-founder of HSN, announces his retirement.

February 1993: Liberty Media acquires a controlling interest of HSN from co-founder Roy Speer in a deal worth $152 million.

November 1995: Hollywood television mogul Barry Diller, formerly of QVC Network Inc. and Fox, is named chairman of HSN.

December 1996: Shareholders vote to merge Home Shopping Network Inc. and Silver King Communications Inc., creating HSN Inc. as the parent company of Home Shopping Network, Silver King Broadcasting and SF Broadcasting.

October 1997: HSN purchases a majority stake in Ticketmaster, then buys most of Universal Studios' television business for $4.08 billion, which includes the USA Network and Sci-Fi Channel. HSN's name is formally changed to USA Networks Inc.

February 1999: USA Networks Inc. merges its Home Shopping Network and other properties with Lycos Inc. to form the new company USA/Lycos Interactive Networks Inc. HSN.com is launched and is profitable within three months.

December 2001: USA Networks Inc., the parent company of HSN, sells its entertainment group to French conglomerate Vivendi Universal for $10.3 billion. The new company name is InterActiveCorp.

August 2006: HSN introduces "Shop by Remote", allowing TV viewers to purchase items with their remote control.

August 2008: HSN spins off from IAC/InterActiveCorp. into a new, independent company.

April 2017: Longtime CEO Mindy Grossman resigns to become president and CEO of Weight Watchers International.

July 2017: HSN acquired by rival retail giant QVC for $2.1 billion

Compiled from Times files by senior news researcher John Martin

HSN acquired by rival retail giant QVC for $2.1 billion 07/06/17 [Last modified: Thursday, July 6, 2017 5:22pm]
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