Wal-Mart Stores Buying Jet.com In $3.3 Billion Deal

Aug 8, 2016

Wal-Mart Stores is expediting its move into e-commerce and its pursuit of Amazon with a $3.3 billion deal to acquire Hoboken, N.J.-based Jet.com. The deal is expected to close this year.

Talk Business & Politics reports:

Wal-Mart said acquiring Jet.com “will build on and complement the significant foundation already in place to serve customers across the Walmart app, site and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.”

According to Wal-Mart, the deal calls for a $3 billion cash payment “over time,” and $300 million in Wal-Mart shares “paid over time as part of transaction.” The company did not provide detail as to the time involved in the cash payment and share distribution.

Rumors of the deal emerged last week, with confirmation coming early Monday (Aug. 8) with an announcement from Bentonville-based Wal-Mart Stores.

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” Doug McMillon, president and CEO, Wal-Mart Stores, said in the statement. “We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”

The following are other reasons cited by Wal-Mart as why it moved to buy the company founded in 2014.

• Demonstrated ability to scale with speed, reaching $1 billion in run-rate Gross Merchandise Value (GMV) and offering 12 million SKUs in its first year.

• A growing customer base of urban and millennial customers with more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders.

• Best-in-class technology that rewards customers in real time with savings on items that are bought and shipped together, thereby reducing the supply-chain and logistics costs often buried in the price of goods.

• A select group of more than 2,400 retailer and brand partners tailored to create an attractive and distinctive assortment for consumers.

“The acquisition of Jet will infuse Walmart with fresh ideas and expertise, as well as an attractive brand with proven appeal, especially with Millennials, the first generation of true digital natives,” Wal-Mart noted in its statement.

Annabal Sodero, assistant professor at the University of Arkansas, whose expertise in supply chain and e-commerce, recently told Talk Business & Politics that the deal makes sense for Wal-Mart.

“Think about it this way, the only way Walmart.com can grow at the rate it needs to grow is by acquisition. Walmart.com could not only gain access to Jet.com talent but also take a competitor out of the market at the same time,” Sodero explained.

Keith Anderson, an analyst with Boston-based Profitero, said Jet.com offers Wal-Mart with talent, competitive insight into Amazon’s operating model, a potentially new customer base (largely in urban areas), and an emerging third-party marketplace platform with above market growth rates.  Anderson also said the deal would have the potential to accelerate Wal-Mart’s online growth which the retailer is under pressure to do given the $2 billion in annual spending the online business is getting at the expense of store expansion.

Talk Business & Politics will update this story later today.