Free

More details emerge on Amazon Zappos deal…

Late yesterday, Amazon (AMZN) filed an amended S-4 over its deal to purchase Zappos that adds a new level of intrigue to the much-talked about deal that we last footnoted here when the initial S-4 came out. Just to refresh your memory, there was lots of speculation that Zappos’ VCs had forced the company to sell to Amazon, something that both Amazon and Zappos CEO Tony Hsieh refuted.

Among the more interesting new details to emerge in the new filing is the negotiation between the two companies: Amazon originally offered $750 million in cash on May 4; Zappos counter-offered for around $915 million in stock on May 22. On June 1, Amazon offered $830 million, minus $52 million in debt and transaction costs and another $30 million for retention costs. On June 8 and 9, the deal was further amended to reflect a purchase price of $838 million, the $52 million in debt and transaction costs, another $35 million for stock-purchase rights and $40 million in retention costs. Even then, it still took another six weeks before the deal was announced for $807 million.

We also thought this new passage in the filing was pretty interesting:

Throughout this time period the Zappos Board considered other strategic alternatives, including debt financing, private equity financing and a current or future public offering. Given the depressed and volatile state of the private and public debt and equity markets at the time, the continued uncertainty regarding the capital markets environment, the potential implied valuations, other
potential terms and conditions of a private or public financing and the uncertainty and risks surrounding any potential financing events, the Board concluded that the valuation, likely other transaction terms and conditions, possible synergies and higher degree of deal certainty were significantly more attractive with a possible business combination with Amazon than the other alternatives considered.

Not directly related, but also interesting was this interview with Hsieh yesterday in which Hsieh described Amazon CEO Jeff Bezos as “a lovely man” and advised entrepreneurs to ask themselves whether “they really need venture capital”.