Walmart buys TV portal to nowhere

Disconnect. Walmart is trying to put itself further into Americans’ homes. The $484 billion retailer is buying Vizio, a manufacturer of connected televisions, for $2.3 billion, less than 0.5% of the retailing giant’s total value. In a world where companies from Amazon.com to Meta Platforms are chasing the same ad dollars, the deal gives Walmart a new portal into the almighty U.S. consumer. But the massive retailer’s abysmal M&A track record suggests the deal is still a waste.

The company led by Doug McMillon said on Tuesday it planned to pay all cash for Vizio. The offer represents a 47% premium to Vizio’s stock price before the Wall Street Journal reported its prospects on Feb. 13. Walmart didn’t say that cost cuts were on the table. Instead, the story is all about culling more commercial spending. Vizio’s hardware helps people connect to apps like Netflix and Hulu, giving its new owner better visibility into habits of streaming watchers. Data, provided by Walmart, could in theory help advertisers fine tune decisions on commercials, making Walmart a more attractive place to park dollars.

The deal is also a flyer on Vizio becoming a main artery to distribute content. As streaming services bundle together, monopolizing the delivery of shows – whether it’s the TV unit or the wifi - becomes more important, too. Vizio, with over 10% of television sales market share, is the third largest, according to Parks Associates. The two largest companies, Samsung Electronics and LG, would be off the table for Walmart to buy.

The trouble is Walmart hasn’t proven itself to be a very effective dealmaker, even when the transactions are small. The company snapped up khaki retailer Bonobos in 2017 for $310 million only to sell it six years later for $75 million to WHP Global and Express. The same fate befell vintage online store ModCloth. Even Jet.com, which Walmart acquired in $3.3 billion in 2016, was folded into its e-commerce unit.

Plus regulators could still get in the way. Amazon was recently thwarted from buying vacuum maker iRobot, a similarly tiny deal. Vizio might be Walmart’s window to the world. As a deal, though, it could become the portal to nowhere.