Why Shares of HSN Inc. Surged Thursday

What happened

Shares of HSN Inc. (NASDAQ: HSNI) soared on Thursday after the company agreed to sell itself to Liberty Interactive (NASDAQ: QVCA). Liberty Interactive will acquire the 62% of HSN that it doesn't already own in an all-stock transaction. HSN stock was up 26.5% as of 2:02 p.m., while shares of Liberty Interactive were down almost 1%.

So what

Liberty Interactive already owns the QVC cable channel, a rival to HSN's Home Shopping Network. The combination will produce more than 55,000 hours of shoppable video content annually, and Liberty Interactive expects meaningful synergies from the deal. Increased development of e-commerce and mobile platforms is also part of the plan.

HSN shareholders will receive 1.65 shares of Series A QVC Group common stock, with Liberty Interactive expecting to issue 53.4 million new shares to HSN shareholders. The transaction is valued at $2.6 billion including debt, and is expected to close by the fourth quarter.

Following the close of this transaction, as well as the close of an earlier deal to acquire General Communication, QVC Group will become an asset-backed stock, comprised of QVC, zulily, and HSN, and Liberty Interactive will be renamed QVC Group.

Now what

QVC President and CEO Mike George described the benefits of the deal: "By creating the leader in discovery-based shopping, we will enhance the customer experience, accelerate innovation, leverage our resources and talents to further strengthen our brands, and redeploy savings for innovation and growth. As the prominent global video commerce retailer and North America's third largest mobile and eCommerce retailer, the combined company will be well-positioned to help shape the next generation of retailing."

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Timothy Green has no position in any stocks mentioned. The Motley Fool recommends General Communication. The Motley Fool has a disclosure policy.