Zalando adds About You to the shopping cart
Berlin-based online fashion retailer Zalando wants to swallow its smaller Hamburg competitor About You. The two companies have signed a binding merger agreement, under which Zalando intends to make a voluntary public offer for all the shares in About You.
The announcement was well received by About You shareholders, as the stock soared from only 3.80 to the 6.50 euros per share offer price. The merger of the two companies makes sense for several reasons, Zalando co-founder and co-CEO Robert Gentz said at a press conference.
„The strategy of About You and our strategy fit very well together, and About You's assets in the B2B and B2C businesses are a great complement to ours.," he said. The combined company would be able to carve out an even larger market share in Europe. Additionally, the transaction presents „a compelling value creation potential that both companies in the same industry can generate.“
73% of shares committed
The management board and supervisory board of About You support the deal. The management, along with About You's main shareholders, has committed to selling their approximately 73% stake in Zalando.
About You was founded in 2014 as a subsidiary of the Otto Group. According to the company, the Hamburg-based mail order retailer, along with Danish entrepreneur Anders Holch Povlsen and Otto's founder’s grandson Benjamin Otto, holds nearly 65% of About You’s shares.
The purchase price of 6.50 euros per share offered by Zalando corresponds to a 12% premium over the analysts' median target price, and a 107% premium over the volume-weighted three-month average price of About You's stock as of 10 December. Zalando thus values About You at around 1.1 billion euros. About You went public in June 2021 at an issue price of 23 euros per share, giving it an initial market capitalisation of nearly 4 billion euros.
No major layoffs expected
With the acquisition, which Zalando plans to fully finance with existing liquid funds, the two companies hope to achieve an annual savings potential of around 100 million euros from 2028 onwards, primarily in B2B business, logistics, payment processing, and through commercial cooperation. Layoffs are not expected to play a major role in the savings plans, but it is too early to completely rule out such measures, noted Gentz. The acquisition is also not seen as a risk to Zalando's positive cash flow, stated CFO Sandra Dembeck.
In the B2C business, the two brands will remain under a dual-brand strategy. In the B2B business, About You’s shop system, Scayle, will complement Zalando’s e-commerce operating system, Zeos. The About You founders and co-CEOs, Sebastian Betz, Tarek Müller, and Hannes Wiese, will continue their work in the company group in their respective current roles.
Mid-term forecast confirmed
The combined company aims for a long-term adjusted EBIT margin (earnings before interest and taxes) of 10 to 13%. Zalando reported a margin of 4.0% for the first nine months of the current year. In the medium term, by 2028, the companies together aim for an average annual growth rate of 5 to 10% in gross merchandise volume and revenue. The adjusted EBIT margin is expected to reach 6 to 8%.
If the competition authorities give the green light for the deal, the transaction is expected to be completed in the summer of 2025, according to the companies.
They are confident of receiving the approvals, as the fashion and lifestyle market in Europe is worth 450 billion euros, and the combined company would only have a very small share of it, said Zalando co-CEO David Schröder.
