Chegg Inc (NYSE:CHGG) announced an agreement has been signed that provide that Ingram Content Group purchase their entire textbook inventory from Chegg. Under the terms Chegg will retain its brand on the materials also. Along with the deal, Chegg will cease to operate it warehouse division by the end of 2015. The deal will benefit shareholders and the students as it offers revenue value for Chegg and provides acceptably priced materials for the students. Ingram’s network of warehouses and its advanced logistics also means books will delivered much faster than normal but ensures the students continue to enjoy the benefits of doing business with Chegg.
Lowering Internal Costs
Great For Both Sides
The deal means Chegg doesn’t have to invest capital to maintain inventories but can still offer the benefits it usually does to students. This creates new cash flow revenue for Chegg Inc (NYSE:CHGG) to focus on other projects and will help to stabilize margins. The company intends to capitalize on the digital services opportunities that exist in their sector and firm up their balance sheet in the process.
Saving Students Time And Money
The deal is renewable and the companies have been experimenting with it for the past two semesters and have seen much success. They will team up to address speed and logistical delivery issues and look to become the de facto standard for text book deliveries. Saving students time and money is the goal and it fills a need for both ends of the agreement. The deal is still being put on paper and certain details still need to be worked out but it is expected to be ratified by the shareholders by the end of the first quarter in 2015. When it is complete, Chegg Inc (NYSE:CHGG) will notify shareholders and the public via 8-K filings. Chegg saved students over $500 million in 2014 alone.
The stock raced to its 52-week high and is looking to build a base to springboard to even higher highs. It has support around $8 and should find that to be strong enough to prevent any dramatic downturns.