Amazon.com in $850 million deal for Web shoe store Zappos

SEATTLE -- Amazon.com said Wednesday it has agreed to buy Zappos.com, a privately held online shoe store, in a deal worth about $850 million.

The deal calls for Amazon to pay for the shoe, apparel and accessories company with about 10 million shares of stock. Amazon values that at roughly $807 million, based on its average closing price in the 45 days that ended July 17.

Amazon said it will also pay $40 million in cash and stock to Zappos employees. The deal is expected to close this fall.

Zappos, founded in 1999, offers free shipping in four or five business days on all its orders. Zappos foots the bill for return shipping, too, and gives customers a year to send back purchases for a refund.

Amazon opened its own shoe and handbag shop under the name Endless.com in 2007. It offers free overnight shipping and free return shipping.

Spokesman Craig Berman said Amazon will keep both Endless and Zappos, and run them as separate entities. He would not comment on whether the recession had hurt sales at Endless, or whether Amazon was able to grab Zappos at a bargain price because of the weakened economy.

Berman also would not say to what extent the companies' ordering and delivery logistics might be combined.

Zappos will continue to operate under current management from its headquarters in Las Vegas, and its Kentucky warehouse will operate as before. Zappos said there are no planned layoffs.

"We realized that Amazon's resources, technology, and operational experience had the potential to greatly accelerate our growth," wrote Zappos CEO Tony Hsieh in a letter to employees.

Hsieh posted a series of questions and answers on the Zappos blog. One was, will Zappos employees get an Amazon discount?

"No, because we are planning on continuing to run Zappos as a separate company with our own culture and core values," Hsieh wrote. "And we're not going to be giving the Zappos discount to Amazon employees either, unless they bake us cookies and deliver them in person."