Zalando to acquire About You, stock drops

Investing.com -- German online retailer Zalando announced on Wednesday that it has agreed to acquire its rival, fashion group About You, for €1.1 billion ($1.2 billion). The move is part of Zalando’s strategy to establish a pan-European e-commerce platform.

The cash offer values About You at €6.50 per share, which represents a 107% premium over its three-month average stock price. About You's shares ended Tuesday at €3.90.

Following the news, Zalando SE (ETR:ZALG ) stock fell around 6% in European trading. Shares of ABOUT YOU Holding AG (ETR:YOUG ) surged around 65% on German exchanges, nearly in line with the offered price.

This acquisition comes as European online retailers face increased competition from fast-fashion giant Shein, known for its low prices and rapid expansion.

Zalando stated that the merged entity aims for an adjusted EBIT margin of 10% to 13%.

“We think this acquisition should serve to increase ZAL's market presence in Europe and will also offer some logistics synergies, although we do think that it does bring some execution and cultural risk,” RBC Capital Markets analysts commented.

“This is in line with ZAL's strategy for bolt-on M&A but it probably means cash returns are less likely now, in our view,” they added.

Major shareholders of About You, such as Otto Group, the Otto Family, Heartland, and the company's management team, have signed binding agreements to sell their shares to Zalando. Together, these shares account for approximately 73% of About You's total share capital.

"The planned two-brand strategy would significantly increase the group's presence in the pan-European markets," said retail group Otto.

About You stated that the deal offers significant potential for value creation across several areas, including B2B services, logistics, payment solutions, and broader commercial partnerships.

Source: Investing.com