Wal-Mart could choose to invest in and not buy Jet.com
August 4, 2016 12:18 PM
(Bloomberg)—Wal-Mart Stores Inc.’s talks to buy online marketplace Jet.com Inc. may ultimately result in a strategic investment rather than an acquisition, according to people familiar with the matter. The sources asked not to be identified because the talks, revealed Wednesday, are private.
Jet, the e-commerce startup that began a year ago billing itself as a challenger to Amazon.com Inc., has been reaching out to Wal-Mart and other retailers for capital to help take on Amazon, with the goal of raising about $640 million at a valuation of approximately $1.7 billion, one of the people said. It’s part of the company’s plan to close funding rounds each year in the fall, though it has become more difficult to raise at the higher valuation because of the broader financial environment, the person said.
Wal-Mart and Jet on Thursday again declined to comment on the possible deal.
Buying Jet would boost Wal-Mart’s e-commerce operations, which have been showing slower growth in recent quarters. Wal-Mart is No. 4 in the Internet Retailer 2016 Top 500 Guide; Amazon is No. 1.
Wal-Mart CEO Doug McMillon has said that e-commerce is a priority and has taken too long to ramp up. Wal-Mart’s online sales were about $14 billion last year, making up 3 percent of its global revenue.
“The only thing I see Wal-Mart gaining is customer acquisition and I’m not sure if that is enough,” said Poonam Goyal, an analyst at Bloomberg Intelligence. “Also, Wal-Mart has a build-versus-buy philosophy, so it’s hard to digest that they are willing to deviate from that at least here in the U.S.”’
Wal-Mart has spent billions trying to expand its online operations to compete with Amazon, including hiring thousands of workers, opening two Silicon Valley offices and building massive e-commerce distribution centers. It has also begun offering an annual subscription service similar to Amazon Prime where members can get two-day shipping for half the price of Prime.
The acquisition talks were reported initially by the Wall Street Journal.
Jet.com, valued at more than $1 billion after its last fundraising round, reached a $1 billion run rate in sales last month, according to one of the people. July sales also beat internal forecasts, the person said.
Since its inception, Jet.com has raised more than $500 million from investors including Chinese internet giant Alibaba Group Holding Ltd., Fidelity Investments, Accel Partners, New Enterprise Associates and Goldman Sachs Group Inc.