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Zalando SE, the German online fashion retailer, agreed to buy rival About You Holding SE for around €1.2 billion ($1.3 billion), in a bid to dominate Europe’s e-commerce market.
Berlin-based Zalando said Wednesday it will offer €6.50 per share for About You. That’s a premium of about 67 percent to the closing price Tuesday.
Zalando said the deal will give it a larger share of the €450 billion European fashion and lifestyle market.
The management and supervisory boards of About You support the transaction, and major shareholders representing about 73 percent of the company’s total shares also agreed to accept the offer, according to the release. This includes the Otto family and Heartland A/S, a company controlled by Denmark’s Holch Povlsen family that owns retailing group Bestseller A/S.
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About You, founded in 2014 as a subsidiary of the Otto Group, has more than 12 million monthly users who can browse a selection of 700,000 items from roughly 4,000 brands.
The company is active in all key markets in Europe and ships products to around 100 countries globally. It also operates a division called Scayle that helps other brands and retailers ramp up their digital businesses, which Zalando said will complement its own e-commerce operating system Zeos.
About You shares soared as much as 67 percent when German exchanges opened, trading in line with the offer price. The stock was down nearly 5 percent in the past 12 months ahead of the takeover news. Zalando shares fell as much as 9.2 percent in early trading. The stock gained 46 percent in the 12 months through Tuesday’s close.
Founders Stay On
The three founders of About You — Sebastian Betz, Tarek Mueller and Hannes Wiese — will continue in their current roles.
While the two online brands will continue to exist separately, there will be efficiencies in shared logistics, payment infrastructure and commercial collaboration. Zalando said it expects the deal to generate about €100 million a year in synergies or cost-savings in the longer term.
While it looks like “a good transaction overall,” there may be “potential for competition concerns in Germany,” Panmure Liberum analyst Sean Kealy said.
He also noted that “the real rationale” for the deal is to combine both retailers’ business-to-business arms - Zalando’s Zeos with About You’s Scayle - which will allow the launch of products across various marketplaces.
The proposed acquisition will require “significant logistics efficiencies” to deliver the promised synergies, said Tatiana Lisitsina, a Bloomberg Intelligence analyst. She added that successful integration of the two business will also be “critical” to justify the high premium paid and realize long-term value.
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Zalando reiterated its medium-term outlook and expects an adjusted earnings before interest margin of between 6 percent and 8 percent in 2028 for the merged group.
By Deirdre Hipwell and Sonja Wind
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Zalando Returns to Growth Thanks to Premium Brands
The online fashion marketplace average order value increased to €60.4 ($65) in the first quarter, from €57.3 a year earlier.
