Anders Holch Povlsen, the owner of Danish fashion company Bestseller A/S, is buying a stake in Zalando GmbH, adding the German online clothing retailer to an investment portfolio that includes its competitor Asos Plc. (ASC)
The billionaire is acquiring 10 percent of Berlin-based Zalando from shareholders including European Founders Fund, Holtzbrinck and Tengelmann, all of whom were among the first investors in the business that was founded in 2008, according to a statement today. All the Zalando shareholders selling shares will maintain an interest afterwards.
Holch Povlsen will be the third-biggest shareholder in the company, which was started by David Schneider and Robert Gentz with the backing of the Samwer brothers. Zalando, which sells designer clothing from labels such as Michael Kors (KORS) and Patrizia Pepe, has been regularly touted by the media as a candidate for an initial public offer, even though it isn’t yet profitable.
The investment is “strategic to some degree because Bestseller has expertise in the area and it seems like they would be an investor who’s in there for the long run,” said Christian Schulze, assistant professor of marketing at the Frankfurt School of Finance and Management.
Bestseller already holds a stake of about 27 percent in Asos, the U.K.’s largest online-only fashion retailer, which in June reported a 45 percent rise in third-quarter retail sales. The Danish company first disclosed it held Asos shares in May 2010, and since then the stock has surged more than sevenfold.
Asos was little changed at 4,919 pence at 4 p.m. today, valuing the company at about 4.1 billion pounds ($6.3 billion).
Holch Povlsen treats the investments in Asos and Zalando “very separately,” Zalando co-Chief Executive Officer Rubin Ritter said in a phone interview. “My reading of it is that he is a great believer in fashion e-commerce. There’s nothing about combining” the businesses.
The price paid for the Zalando stake wasn’t disclosed. The company’s largest investor, Investment AB Kinnevik (KINVB), said in June that it exercised an option to acquire an additional 3.5 percent for 100 million euros, boosting its stake to 38 percent. Its holding will be 37 percent after Holch Povlsen’s investment.
A spokesman for Bestseller declined to comment on the price. Ritter also declined to comment on the deal’s value.
Zalando sells all Bestseller brands throughout Europe and has become one of the Danish company’s main wholesale partners.
“We’ve been supplying the company with Bestseller goods since early 2010,” Ritter said. “We have a similar view of where we want to take the business. It’s not about a fundamental change in the strategy, but about taking someone on board who brings a lot of experience and knowledge to the table.”
Closer ties between Zalando and Bestseller “will become beneficial for both our companies in the long run,” Holch Povlsen said in a statement on Bestseller’s website today. “We share many views, and it is no secret that we both have a great belief in the future of fashion e-commerce.”
Founded in Denmark in 1975 by Holch Povlsen’s parents, Bestseller sells clothing brands including Jack & Jones and Vero Moda and has more than 3,000 stores in 38 markets. The company is the eighth-biggest retailer in the Asia-Pacific region and only the 29th biggest in western Europe, according to researcher Euromonitor International.
“Western Europe is a much tougher market to navigate in for Bestseller, especially in the current conditions,” Ashma Kunde, an apparel analyst at Euromonitor, said in a phone interview. “Having a stake in the region’s most successful online players, Asos and Zalando, will definitely improve Bestseller’s presence in these markets and strengthen the company’s wholesale business. From Bestseller’s point of view, Asos is going to be much more important, especially with Asos expanding into markets like Russia and China.”
Asos’s Russian country-specific website, which started up in May, has gone well, Chief Executive Officer Nick Robertson said in June, without giving details. China, which is planned for October, is on track, he said at the time.
Zalando’s operations in Germany, Austria and Switzerland broke even before interest and tax last year, though the company posted a group Ebit margin of minus 8 percent of sales because of the cost of opening business in additional countries.
Banks have been reaching out to the company regarding the possibility of an IPO, two people familiar with the matter, who declined to be identified because the matter is private, said in June. Still, Europe’s biggest online retailer for shoes and fashion currently has no plans for an IPO, spokesman Steffen Heinzelmann said at the time.
“We received a lot of interest from all sides, but we only very selectively talked to potential partners,” Ritter said today. “Anders is definitely such a partner.”
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