Wal-Mart to buy Jet.com in bid to strengthen e-commerce offering

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A person walks outside a Wal-Mart store in Mexico City January 11, 2013. REUTERS/Edgard Garrido/File Photo
A person walks outside a Wal-Mart store in Mexico City January 11, 2013.

Reuters/Edgard Garrido/File Photo

Wal-Mart Stores Inc said on Monday it would buy online retailer Jet.com for about $3 billion, the largest-ever deal for an e-commerce startup, as it races to build a Web business to better compete with Amazon.com Inc.

Wal-Mart’s online business has struggled, posting its slowest growth in a year in the latest quarter, and the Jet deal reflected management’s eagerness to prioritize online growth.

Wal-Mart, the world’s largest retailer, said it would pay around $3 billion in cash for Jet, part of which would be paid over time. They will also pay an additional $300 million in shares over time.

The purchase comes after Wal-Mart said in June it sold a majority stake in Chinese e-commerce firm Yihaodian to JD.com Inc, which is China’s second-largest e-commerce company.

Wal-Mart’s sales in the online unit were $13.7 billion in 2015, according to research firm Internet Retailer.

“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,” Wal-Mart Chief Executive Officer Doug McMillon said in a statement.

Jet.com was launched by Marc Lore in July last year. Its initial strategy was to offer large discounts and the lowest prices on items based on a pricing formula that took into account factors such as the number of items customers added to their shopping cart for an annual $50 fee.

But three months after launch, Jet changed strategy and eliminated its subscription model.

While Wal-Mart and Jet will maintain distinct brands, they will leverage technology from both companies to develop new offerings, Wal-Mart said.

Allen & Co and J.P. Morgan Securities LLC were financial advisers to Wal-Mart for the deal.

Wal-Mart’s shares traded down 1 percent at $73.09 on Monday.

(Reporting by Sruthi Ramakrishnan and Gayathree Ganesan in Bengaluru; Editing by Saumyadeb Chakrabarty and Jeffrey Hodgson)