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USA Networks takes $500 million stake in Styleclick

USA Networks will merge its USA Internet Shopping Network with Styleclick.com to form a new company--called Styleclick--that will own and operate their combined properties.

Barry Diller's USA Networks pushed deeper into online retailing today by taking a majority stake in Styleclick.com for cash, advertising time and assets valued at about $500 million.

The deal gives USA a 75 percent equity stake in Styleclick.com, a company that helps merchants and manufacturers set up shop on the Web. The firm also runs a network of online sites dedicated to brand-name apparel and other shopping goods. The move comes just weeks after Diller's media company acquired customer service firm Precision Response for $650 million.

USA said it will merge its USA Internet Shopping Network (ISN) with Styleclick.com to form a new company--called Styleclick--that will own and operate their combined properties. ISN runs a portal that includes auction and shopping services, including FirstAuction.com and FirstJewelry.com.

Through its proposed but failed acquisition of Lycos last year, USA was hoping to build the kinds of e-commerce sites that it now plans to offer with today's deal. But CMGI's David Wetherell, as one of Lycos' biggest investors, blocked the acquisition because of what he perceived as a less than premium price for the Lycos portal.

Today's deal breaks no new ground. The online retail landscape is increasingly littered with sites that offer merchants services to help set up online shops or become part of a larger network of shopping sites. Styleclick faces stiff competition from ShopNow.com, Bluefly.com, Fashionmall.com and several other players.

Still, the new company has several distinctive advantages over its competitors. For one, the new company will get $10 million toward on-air promotions over USA Networks' vast cable empire. Another advantage is the long experience USA has in direct selling, distribution and fulfillment through its cable Home Shopping Network.

USA will also invest $40 million in cash to help fund the company's growth, and it will provide a $10 million loan. In addition, USA received warrants to purchase additional shares of the new Styleclick.

USA hopes to expand ISN more quickly with the addition of Styleclick.com's network of branded commerce sites. The new company will also be able to leverage the offerings of USA Electronic Commerce and Services, a USA company that helps businesses open shop on the Net.

Shares of USA moved higher 88 cents, nearly 2 percent, to $51.38 in early trading. The stock has traded as high as $58.13 and as low as $31.38 during the past 52 weeks. Last week, USA announced a 2-for-1 stock split.

Styleclick.com edge higher by a quarter, rising about 1.5 percent to $17.25 this morning. The stock has traded as high as $22.25 and as low as $6.25 during the past 52 weeks.

"In its new capacity, Styleclick will be a unique proposition to both consumers and retailers--one that will offer both constituencies the highest level of technology, customization and reliability," USA Networks Interactive president Dara Khosrowshahi said in a statement.

The transaction is expected to close in the second quarter and is subject to regulatory and Styleclick.com stockholder approval. The new company is expected to trade on Nasdaq stock market under the symbol "IBUY."

Maurizio Vecchione, Styleclick.com's co-chief executive, will be the new company's CEO.