Groupon agreed to buy LivingSocial, absorbing an old rival in the once-fierce war between companies offering daily deals via e-mail.
The amount of the purchase isn't material, and the transaction should close next month, Groupon said Wednesday in a statement. Amazon-backed LivingSocial had cut more than half its workforce in March, part of a downward spiral from the headier days of 2011, when it was valued at $6 billion in a funding round.
The acquisition didn't impress Groupon investors, who sent shares down as much as 11% in extended trading despite an earnings report in line with analysts' estimates and a more optimistic forecast for the rest of the year.
Just as Groupon has been moving away from its daily-deal roots, converting itself into an online marketplace, LivingSocial had turned to a strategy involving credit-card discounts at restaurants. The acquisition will be a good fit because it will expand Groupon's customer base and because LivingSocial also provided deals for local businesses, Groupon Chief Executive Officer Rich Williams said.
"It couldn't be more down the center," Mr. Williams said in a phone interview. The CEO has been leading a major restructuring at Groupon, which has included staff cuts and exits from many countries around the world. Further divestitures will continue into 2017.
Amazon invested $175 million in LivingSocial in 2010, then took a $169 million charge in the third quarter of 2012 due to the declining value of the company after consumers and retailers lost enthusiasm for internet coupons.
Groupon itself has lost much of its luster since the early promise of e-mail deals proved difficult to convert into a large-scale business. Valued at $16.7 billion when it went public in 2011, the Chicago-based company had a market capitalization of $3.02 billion at Wednesday's close.
Sales will reach at least $3.08 billion this year, with adjusted earnings before interest, tax, depreciation and amortization of at least $150 million, Groupon said, raising both forecasts.
"What we are seeing there is just solid execution against our strategy," Mr. Williams said.
-- Bloomberg News