Groupon buys Ideeli in a 43 million cash deal

Groupon has announced the acquisition of online "flash-sale" retailer Ideeli for 43 million dollars in cash in a movement to expand in the apparel sector. Ideeli will keep its headquarters in New York and continue to run as a separate website.

"Our customers have a demonstrated appetite for these offers, and by broadening our reach in this space Groupon is even better positioned as the place you start when you want to do or buy just about anything, anytime, anywhere,” Groupon CEO Eric Lefkofsky said in a statement Monday, who also highlighted the growth potential of Ideeli's smartphone offerings and fashion brands.

It is

noteworthy that Ideeli has been under the radar for many investors in the past couple of years, having raised up to 100 million dollars in venture capital. Groupon has filed with its 8-K report detailing the acquisition, which was closed on Monday.

Groupon acquires fashion flash-sales site Ideeli

The discount vouchers online platform has reportedly said that Ideeli made 115 million dollars in revenue for the fiscal year ended February 2, 2013, and a 30 million dollars operating loss.

Ideeli started in 2007 and was part of a group of so-called flash sales companies that specialized in fast, daily online events that offered heavily discounted fashion apparel in limited supply. Nowadays, Ideeli sells men's and women's clothing and accessories and home decor items at a sale price for a limited time.

"Ideeli extends our fashion presence and brings great relationships with many of the top brands in apparel," said Groupon´s CEO Eric Lefkofsky.

Management at Ideeli are equally enthusiastic about the deal, pointing out how “Groupon’s brand, reach and vision as an e-commerce destination make it a tremendous place to continue to grow our company,” said Ideeli CEO Stefan Pepe in a statement. “We look forward to bringing the great deals we offer to Groupon customers.”

However, the market did not received the news in such a positive spirit, sending Groupon's stock down by 24 cents, or 2.1 percent, to 11.32 dollars in morning trading. Shares have more than doubled in the past 12 months but remain far below the 20 dollars apiece the company floated to when it went public in November 2011.

"Fashion is one of the top categories for e-commerce and it should keep growing. But flash sales have lost their momentum so it will be interesting to see if Groupon will keep that format," said commenting the news Sameet Sinha, an analyst at B. Riley & Co.

The deal gives Groupon relationships and expertise in the fashion sector and Ideeli's customer acquisition costs may fall if the company's sales events are marketed to Groupon's existing customers, Sinha added.