The Berlin-based firm said on Wednesday it wanted to list a 10-11
percent stake on the Frankfurt stock exchange this year, which would
value the company at at least 4.5 billion euros in what would be one
of Germany's biggest technology flotations for years and Europe's
top tech listing since France's Worldline in June.
Zalando has spent heavily on marketing to establish itself as the
leading online fashion site in its core markets Germany, Switzerland
and Austria where it makes 60 percent of sales, but is now investing
more in its own fashion labels and the latest apps for smartphones
to keep customers coming back.
Zalando is hoping it will be valued at a premium to its closest
competitor Britain's ASOS, advisors say. It boasts that it is ahead
of its rival in Europe in terms of total revenue, website traffic,
brand awareness and active customers.
Buoyant capital markets have encouraged a raft of e-commerce
flotations this year. Although a recent sell-off in tech stocks has
dampened investor appetite, Alibaba is still expected to raise more
than $15 billion, making it one of the biggest tech initial public
offerings (IPO) in history.
Consultancy PwC said the second quarter of 2014 was the busiest for
technology IPOs for two years, with 43 companies listing worldwide
with a total value of $12.3 billion.
Zalando is set to price its IPO the week of Sept. 29, according to a
source familiar with the transaction. German venture capital firm
Rocket Internet, which helped launch Zalando and many other
start-ups, is also expected to announce plans to float next week or
the week after, sources said.
Zalando, which unveiled a new advertising campaign, website,
packaging and apps at its first news conference last week, said the
offering would consist solely of new shares from a capital increase.
Zalando said none of its existing shareholders planned to sell any
shares as part of the offering, although they would in theory be
able to buy the new shares when it takes place.
Zalando, which began selling shoes in 2008, now ships 1,500 brands
to customers in 15 countries in Europe, gaining widespread
visibility with its "scream for joy" slogan and ads showing
delighted customers tearing open Zalando packages.
PREMIUM TO ASOS?
ASOS, which targets a younger clientele than Zalando and also
operates outside Europe in markets like China and Australia, has had
a meteoric rise since it listed in London at only 20 pence in 2001
and is trading at 1.8 times sales with a market capitalization of
2.4 billion pounds ($4 billion).
ASOS shares peaked at more than 70 pounds but they have fallen more
than 50 percent this year after a profit warning and a warehouse
fire, although they jumped on takeover speculation last week.
Zalando laid the groundwork for the IPO last week by posting a 29.5
percent gain in first-half sales to 1.047 billion euros and
announcing its first-ever operating profit - 12 million euros
compared with an operating loss of 72 million a year ago.
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Zalando board member Rubin Ritter said the IPO was the next logical
step for the company's development as it gave it flexibility to
pursue its long-term growth ambitions.
The retailer sees huge potential to grow further in its existing
markets given that it has just half a percentage point share of a
European fashion market worth 420 billion euros, but is also
considering expanding further into eastern Europe.
Zalando expects to further improve profitability by reducing the
cost of sales through strong partnerships with brands like TopShop
and Diesel, improving efficiency at its logistics centers and
reducing marketing costs as a percentage of sales.
It said its current logistics infrastructure is designed to handle
about twice the revenue it generated in the first half.
Sweden's Kinnevik, Zalando's biggest investor with a 36 percent
stake, welcomed the listing plans.
"We look forward to continuing to work with Zalando's founders and
management team, and to support their future growth ambitions after
the listing," Kinnevik Chief Executive Lorenzo Grabau said in a
Zalando now has a total staff of 7,000 people, with an average age
of just 29. More than 40 percent of its traffic comes from mobile
devices and its total number of active customers rose to 13.7
million from 11.6 million a year ago.
Morgan Stanley, Goldman Sachs and Credit Suisse are coordinating the
IPO, while Deutsche Bank and JP Morgan are joint bookrunners.
Jefferies and Stifel Nicolaus Europe are Co-Lead Managers.
($1 = 0.7612 euro)
(1 US dollar = 0.6065 British pound)
(Additional reporting by Alexander Huebner; Editing by Maria Sheahan
and Louise Heavens)
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