(Bloomberg) -- 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% to the closing price Tuesday.
The deal will help Zalando increase its share of the €450 billion European fashion and lifestyle market amid intensifying competition. Besides gaining access to About You’s younger customer base, Zalando estimates the combination will generate about €100 million a year in synergies or cost-savings in the longer term from shared logistics, payment infrastructure and commercial collaboration.
“It’s also no surprise that we get to a large number if we combine these two companies,” Zalando’s Co-Chief Executive Officer David Schröder said, referring to the savings.
The management and supervisory boards of About You support the transaction, and major shareholders representing about 73% 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.
Panmure Liberum analyst Sean Kealy said it looks like “a good transaction overall,” though there may be potential for competition concerns in Germany.
Schröder, however, said he’s confident that the deal will happen, saying “the combined market share of the group is super small” in the context of the overall European fashion market.
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 about 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% when German exchanges opened, trading in line with the offer price. The stock, which briefly traded at more than 25 euros after an initial public offering in 2021, has fallen nearly 5% in the past 12 months ahead of the takeover news.
Zalando shares fell as much as 9.2% in early trading. The stock gained 46% in the 12 months through Tuesday’s close.
Schröder said there will be only limited changes to the two companies’ staffing. The three founders of About You — Sebastian Betz, Tarek Mueller and Hannes Wiese — will continue in their current roles.
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 businesses will also be “critical” to justify the high premium paid and realize long-term value.
Zalando reiterated its medium-term outlook and expects an adjusted earnings before interest margin of between 6% and 8% in 2028 for the merged group.
--With assistance from James Cone and Neil Campling.
(Updates with comments from Zalando Co-CEO starting in fourth paragraph.)
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