By Dow Jones Business News,
February 14, 2014, 08:45:00 AM EDT
The owners of Europe's largest online retailer Zalando are preparing for an initial public offering that could yield
an overall valuation of up to EUR8.5 billion ($11.59 billion), after the company reported a surge in 2013 revenue.
A public offering in 2014 would come just six years after the founding of the fast-growing company. Zalando's owners,
including Swedish investment firm AB Kinnevik, have held talks with investment banks to potentially advise on the
transaction, according to two people familiar with the matter. They said Goldman Sachs, Morgan Stanley and J.P. Morgan
Chase & Co. have good prospects getting a mandate.
With the trend to online shopping flourishing in Europe, Zalando Chief Executive Rubin Ritter was noncommittal on IPO
"An IPO could be an interesting option in the future, but no decision has been made," Mr. Ritter said in an interview.
Berlin-based Zalando focuses on clothes and shoes. Over the past year it added a handful of new country shops for a
total of 14 in Europe. Friday, the company reported a 50% rise in 2013 sales to EUR1.8 billion, though it remains
unprofitable. Last year, it had a negative margin of slightly below 7% on earnings before interest and tax, translating
into a loss of around EUR120 million. A year earlier, Zalando posted a negative EBIT margin of 7.2%.
Mr. Ritter said he was satisfied with the 2013 performance, although a mild winter and investments in new distribution
centers hampered profitability.
"We want to grow further but are clearly focused on improving margins by making advertising and our distribution
centers in [the German cities of] Erfurt and Mönchengladbach more efficient," he said.
The retailer was profitable for the first time in 2012 in its core markets of Germany, Switzerland and Austria.
Overall, Zalando is unlikely to be profitable before next year, according to estimates from UBS AG, yet most investment
banks value the online retailer substantially above EUR5 billion given its rapid sales growth and a skyrocketing trend
for online shopping.
UBS has estimated Zalando's value at roughly EUR5.78 billion, while Citi analysts peg it closer to EUR8.5 billion,
Kinnevik itself assessed Zalando's fair value at EUR3.9 billion as of end-December, according to its 2013 financial
statement, compared with EUR3.7 billion at end-September.
UBS forecasts revenue to grow to EUR2.8 billion this year and EUR3.8 billion in 2015, when it expects Zalando to reach
Zalando's largest shareholder, AB Kinnevik, holds about 37%, followed by the investment vehicle of the Samwer
brothers, German Internet investors, with 18%. A third shareholder is Holch Povlsen, founder and chief executive of the
Danish fashion brand Bestseller. Further shareholders include investment firm DST Global and the venture capital arms of
German publisher Holtzbrinck and food retailer Tengelmann.
It is unclear whether all of its shareholders would sell shares in an IPO or retain their holding.
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