German online retailer Zalando said on Wednesday it had struck a deal to buy rival fashion group About You for 1.1 billion euros ($1.2 billion), as part of plans to create a pan-European e-commerce platform.
The cash offer corresponds to 6.50 euros per share, a 107 per cent premium to About You’s three-month average stock price. About You’s shares closed at 3.90 euros on Tuesday.
Zalando’s shares fell as much as 9 per centin early trade, and were down were 6 per cent to 32.26 euros at 0900 GMT. About You’s shares were up 65 per cent at 6.44 euros.
Baader Helvea analyst Volker Bosse said the deal made sense strategically and called it a “bold consolidation step”, although it will weigh on Zalando’s profitability in the short term as About You is loss-making.
Zalando highlighted About You’s enterprise software platform Scayle, which is used by 200 shops across Europe and North America, including optics firm Fielmann and soccer club Manchester United.
Bosse also said the deal would especially help Zalando’s business-to-business (B2B) sales segment.
The proposed takeover comes as the rapid growth of low-priced fast-fashion retailer Shein has put pressure on online players across Europe that have struggled to compete on price.
“The planned two-brand strategy would significantly increase the group’s presence in the pan-European markets,” said About You’s major shareholder, German retail group Otto.
The combined business of Zalando and About You aims to have an adjusted earnings before interest and taxes (EBIT) margin of 10-13 per cent over the long term, Zalando said in a statement.
In 2023, Zalando posted an EBIT margin of 3.4 per cent, and it plans for the combined entity to reach 6-8 per cent by 2028.
Zalando said Otto and an investment company controlled by Heartland A/S, as well as About You’s board members, who will continue their work in the combined entity, had decided to accept the offer.
Otto brought About You, whose products are tailored for younger audiences, onto the stock exchange three and a half years ago at an issue price of 23 euros per share.
