Paying $3.3 billion to acquire a two-year-old e-commerce upstart Jet.com might have looked absurd to many but experts knew the real reason was something else. The acquisition was more about the company’s CEO, Marc Lore than anything else.
Recode reports that Lore’s agreement with Walmart wants him to stay with the retailer for at least five years, according to a person familiar with the deal. A portion of the $3 billion in cash will be paid out over five years. The same goes for the additional $300 million in stock tied to the incentive plan for Lore and other Jet executives.
In total, Lore could make an estimated $750 million to $1 billion, if he honors his full agreement, reports Recode.
Walmart had missed on Lore during Quidsi deal which was snapped up by Amazon.com for $545 million following a bidding war but it did not want to miss the opportunity this time around. Unlike in 2010, when Walmart was up against Amazon as well as Walgreens in the bidding, there was no competition for Jet, sources said. Lore had spoken with other potential strategic investors because he knew Jet would require deep-pocketed financiers for years to come, but Walmart was alone in pursuing an acquisition, said the sources.
Lore will be running both Jet.com and Walmart.com after the deal closes later this year and will report directly to Walmart CEO Doug McMillon. Walmart believes Lore is the bet that could help to close the gap between Amazon and Walmart.com. It also expects to eventually port over some Jet technology, including a creative pricing model, to Walmart.com and thinks Jet.com can grow into a popular destination for younger shoppers.