Big box retailer Wal-Mart sealed the acquisition of Jet.com, the US-based e-commerce company backed by e-commerce group Alibaba and internet technology conglomerate Alphabet, on Friday, sources have told TechCrunch.
Wal-Mart formally announced the transaction, which is made up of $3bn in cash that will be paid in instalments and $300m in stock, today. Reports last week suggested Wal-Mart was lining up the acquisition for ‘up to $3bn’ but a source with direct knowledge of the deal told TechCrunch the companies signed the deal on Friday.
Jet launched its e-commerce platform in July 2015, two years after it was founded, offering customers the chance to save money on a wide range of consumer products. Its algorithms calculated the final bill based on the amount of goods bought and a customer’s proximity to one of its warehouses.
Wal-Mart is buying Jet in a bid to compete against established e-commerce players like Amazon which are dominating the online market. That strategic value will have been judged to outweigh the losses made by Jet, which was spending between $20m and $25m each month on advertising, Recode reported.
Jet founder and CEO Marc Lore, who had a 25% stake, will continue to head the company, which will maintain a distinct brand. He will also take over Wal-Mart’s online activities, reporting directly to Walmart chief executive Doug McMillon, according to Recode.
McMillon said in a press release announcing the deeal: “We are looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want.
“We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com will grow faster, the seamless shopping experience we are 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 is another jolt of entrepreneurial spirit being injected into Walmart.”
Both TechCrunch and Recode stated Jet had raised more than $800m in financing altogether, $140m of which came in a February 2015 backed by Alphabet subsidiary GV (then called Google Ventures), New Enterprise Associates, Accel Partners, Bain Capital Ventures, Goldman Sachs, Accel Partners, Silicon Valley Bank, Coatue Management, General Catalyst Partners, Norwest Venture Partners, Thrive Capital and Temasek that valued Jet at $600m post-money.
GV and Bain Capital Ventures were joined by Alibaba for a $350m round in November led by financial services group Fidelity that Jet raised at a $1.35bn post-money valuation. Fidelity had pledged to invest a further $150m but that funding has not been publicly confirmed.
Allen & Company and JP Morgan Securities were financial advisors to Wal-Mart on the transaction.
– This story was updated on 8th August to reflect the official announcement of the deal.