Deal worth billions

Fashion retailer Zalando swallows rival About You

Billion-euro deal in German online fashion retail: Zalando wants to completely take over its smaller competitor About You. The main shareholders around the Hamburg-based retail and logistics group Otto have already agreed to sell their shares, the Berlin-based company announced on Wednesday.

Europe's largest online fashion retailer is offering 6.50 euros per About You share. Based on the outstanding shares, this puts the value of the company at 1.13 billion euros. Zalando emphasized that the deal would be financed entirely from its own funds. The cash position amounts to 2.4 billion euros. The company expects the takeover to generate an additional operating profit of 100 million euros per year in the long term.

In its announcement, it drew attention to the merger of the two corporate customer divisions "Scayle" and "Zeos". The result is an ecosystem that supports other companies and brands in handling their online business internationally. Analyst Volker Bosse from Baader Helvea Bank also emphasized that these areas complement each other particularly well. He praised the transaction as a "bold consolidation step in European online fashion retail".

Service provider for third parties
For About You, the leasing of the store software "Scayle" to other companies is the growth driver and revenue generator. Zalando offers a similar program with "Tradebyte". The Berlin-based company also makes its infrastructure available to third parties in the "Zeos" division. In online fashion retail, About You will reportedly remain a brand.

When asked during a conference call how much the combined corporate customer business will contribute to the expected profit boost, Zalando Co-CEO Robert Gentz did not provide any precise details. "Both areas will make a significant contribution." Full synergies are expected from around 2028. Gentz ruled out any major job cuts. "If at all, there will only be minor changes in our teams."

Zalando confirms medium-term goals
Zalando also confirmed its medium-term targets. Both sales and the gross volume of goods traded via the platform are to grow by five to ten percent annually until 2028. By this time, the adjusted operating margin should reach six to eight percent. In the 2023 financial year, it was 3.5 percent.

Nevertheless, Zalando's shares fell by up to 9.2 percent, the sharpest drop since six months ago. "In the short term, Zalando's profitability will suffer as About You is making losses," said analyst Bosse. In contrast, the shares of the takeover target recorded a record price jump of up to 67 percent to 6.52 euros.

Zalando has reportedly already secured almost three quarters of About You's shares. The main shareholders - Otto and the management of the online retailer - have agreed to sell their share packages. In addition, the three company founders Sebastian Betz, Tarek Müller and Hannes Wiese would retain their current positions. Zalando Supervisory Board member Anders Holch Povlsen, who holds a stake in About You, was not involved in the takeover decision in order to avoid a conflict of interest, emphasized Zalando co-founder Gentz.

Otto floated About You on the stock exchange three and a half years ago at an issue price of 23 euros. The group is primarily known for its mail order business of the same name, but Otto also owns the parcel service Hermes, among others.