HBC in talks to acquire Gilt Groupe Inc.

Gilt Groupe Inc. is currently in talks to be sold to Hudson's Bay Co., the parent company of Saks Fifth Avenue and Lord & Taylor. The unfortunate news for Gilt is that they will be sold for a fraction of the value placed on it by investors four years ago. HBC is expected to acquire Gilt Groupe Inc. for 250 million dollars, a quarter of the 1.1 billion dollar value venture capitalists placed on the company in 2011.

Since 2007, Gilt has raised 280 million dollars in capital, according to Dow Jones VentureSource. They also had a reported 600 million dollars in revenue.

Gilt was one of the first pioneers of what is known as "flash sale" sites. Flash sale sites offer high-end items like apparel, furniture, and bedding at heavily discounted prices, sometimes up to 70 percent off. According to WSJ, which first broke the story, Gilt could be grouped together with the Off 5th outlet brand at Saks. Off 5th is also known for their heavily discounted designer items.

Hudson's Bay Co. in talks to acquire flash sale site Gilt

HBC, which was planning to announce the deal early next year, isn't guaranteed ownership of Gilt Groupe yet. It is possible that they could be outbid by another company, and this expected deal could fall through entirely.

If the deal does go through, it is possible that Gilt shops could begin opening inside of Off 5th brick-and-mortar stores. Most of Gilt's management team is expected to remain intact after the deal.

Gilt was once poised to be on the track to an IPO, but once the economy recovered and deep discounts became common place, that hope was dashed. Flash sale sites also have more established outlet stores like Off 5th and Nordstrom Rack to compete with.

Gilt's competitor Ideeli.com, was sold earlier last year for 43 million dollars, which was also beneath the valuation of their last funding.

Gilt, like many of its competitors, has seen reductions in the size of their staff. This year, the company was forced to cut several jobs.

Flash sales is a highly competitive industry with low-margins, so, Saks might have a tough time turning Gilt around. However, the company still maintains a level of popularity among e-commerce shoppers. They still boast their position as the industry leader of the flash sales model, so hopefully under HBC's direction they'll be able to make a turnaround.

photo:inc.com