By Andrey Sychev
(Reuters) -Europe’s biggest online retailer Zalando plans to buy About You in a deal valuing the smaller rival at 1.13 billion euros ($1.19 billion), the companies said on Wednesday, marking the next big move to consolidate Europe’s online apparel market.
Surging inflation and the rapid growth of low-cost online platforms like Shein have polarised the apparel retail industry and driven deals, with bigger players seeking to shore up their market share by acquiring smaller rivals.
Zalando’s shares fell by as much as 9% following the announcement of the deal, as analysts warned that it could be overpriced and pointed to a short-term drag on profitability since About You operates at a loss.
Zalando’s offer – which About You’s top shareholders, including German retail group Otto, have committed to accepting – prices shares at 6.50 euros, about two thirds higher than the Tuesday closing price.
Shares in About You were up 64% in morning trading, while Zalando shares pared some of their losses and were trading 5% lower by 1200 GMT.
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Zalando, which has been scaling up its logistics business on strong consumer demand, touted the move as an opportunity to unlock synergies, particularly in the business-to-business area.
The takeover would hand over About You’s enterprise software platform Scayle, used by 200 shops across Europe and North America, including optics firm Fielmann and soccer club Manchester United.
In terms of selling to retail customers, Zalando sees the acquisition as a way to reach younger shoppers, as About You actively collaborates with social media influencers on fashion discoveries, co-chief executive Robert Gentz said.
“This is really a very value-accretive deal for the longer term,” CFO Sandra Dembeck said in a media call.
The company said it is targeting an earnings boost in the long term of 100 million euros annually as a result of the deal.
Asked about potential layoffs, Zalando’s co-chief executive Robert Gentz said there would be “if at all, only limited changes in our teams”.
Sports Direct owner Frasers is among those driving the dealmaking in Europe’s online shopping sector, having bought, or bid for, multiple retailers and brands over the past two years.
The shakeout phase follows rapid growth for the sector during the pandemic, with overstretched companies now facing cooling demand, according to Morningstar analyst Jelena Sokolova.
($1 = 0.9522 euros)
(Reporting by Andrey Sychev, Kirsti Knolle and Hakan Ersen; writing by Rachel More; editing by Mark Potter, Bernadette Baum and Jane Merriman)
