Wal-Mart passed on chance to bid for Kiva-source

Thu Mar 22, 2012 3:44pm EDT

* Could not see attractive return from Kiva buy-source

* Wal-Mart not Kiva client, making deal harder to justify

* Tried to buy Quidsi before Amazon bought it-source

By Alistair Barr

SAN FRANCISCO, March 22 (Reuters) - Wal-Mart Stores Inc was offered the chance to bid for warehouse robot developer Kiva Systems, but passed on the deal because it did not see an attractive return on the investment, a source familiar with the situation said.

The world's largest retailer is also not a customer of Kiva, which Amazon.com agreed to buy this week for $775 million, making it more difficult to justify an acquisition, the source added.

George Boutros, a partner at Frank Quattrone's Qatalyst Partners investment bank, advised Kiva, another source familiar with the situation said.

The sources did not want to be identified because they are not authorized to speak publicly about such matters.

Wal-Mart is investing a lot in its e-commerce business to try to catch up with Amazon, the world's largest Internet retailer. This means the companies sometimes vie for acquisition opportunities in the sector.

When Quidsi, the company behind Diapers.com, was up for sale in 2010, Wal-Mart pursued an acquisition, according to another source familiar with that situation. However, Quidsi entered exclusive negotiations with Amazon and ended up agreeing to sell to them in late 2010 for more than $500 million, the source added.

Wal-Mart may have been less interested in Kiva because most of the retail giant's warehouses are not designed for e-commerce, according to Scot Wingo of ChannelAdvisor, which helps merchants sell more online.

"I can see how Wal-Mart would not have valued Kiva as much as Amazon," Wingo said.

Wal-Mart's warehouses are mostly designed to take in products in bulk and ship them out in bulk to the company's stores. In contrast, Amazon has to take products into its warehouses in bulk and then pick out individual items and ship them to people's homes or offices, Wingo explained.

Kiva's technology helps with these more-complicated e-commerce shipping tasks. For instance, Kiva robots and software re-organize warehouses over time, bringing higher turnover products closer to human pickers and packers, Wingo explained.

"Some on Wall Street are scratching their heads about the Amazon purchase, but many people don't get the complexity of making e-commerce fulfillment centers work," Wingo added. "If you're Amazon, spending so much on all these warehouses, the deal makes sense."

A Wal-Mart spokesman said Wal-Mart partners with a variety of companies for distribution center technology. He also said the company does not work with Kiva and did not pursue buying it.

Wal-Mart declined to comment on whether it was offered the chance to buy Kiva and did not respond to a request for comment about its interest in Quidsi.

An Amazon spokeswoman said Kiva's material handling technology improves productivity by bringing the products directly to employees to pick, pack and stow, helping fulfill customer orders faster. "We share their passion for invention and want to support their continued growth." She declined to comment further.