Sept. 3 (Bloomberg) -- Zalando SE, Europe’s largest online-only shoe and fashion retailer, plans to sell as much as 11 percent of its shares in an initial public offering this year in the first major IPO for Berlin’s startup scene.
The seller of products from $2,000 designer dresses to Adidas AG German soccer jerseys plans to sell a stake of at least 10 percent in the second half on the Frankfurt stock exchange, Zalando said in a statement. The offering may value the company at 4 billion euros ($5.3 billion) to 5 billion euros, people familiar with the matter have said.
Europe’s IPO market has recovered with retailers including Russian supermarket operator Lenta Ltd. and greeting-card seller Card Factory Plc raising about $7.5 billion this year, the most in at least a decade, according to data compiled by Bloomberg. Germany hasn’t had a big technology IPO since Deutsche Telekom listed its dial-up Internet business in 2000 and Zalando represents the country’s most significant e-commerce initial share sale to date.
The IPO is important for Investment AB Kinnevik, which owns a 36 percent stake in Zalando, and Rocket Internet, the technology incubator that oversaw the company’s early growth, said Bjoern Gustafsson, an analyst at Kepler Cheuvreux in Stockholm. “It will be used as a proxy for the valuation of the other e-commerce clones in Kinnevik’s and Rocket’s portfolio,” Gustafsson said.
Gustafsson recommends buying shares in Kinnevik, whose holdings include communications, e-commerce, entertainment and financial services.
Zalando’s offering will consist of new shares and the existing investors won’t sell in the IPO. Berlin-based Zalando operates in 15 European countries including Poland, Finland and Spain.
The other top five owners of Zalando are the Samwer brothers’ Global Founders with 16 percent, Anders Holch Povlsen with 10 percent, Russian billionaire Yuri Milner’s DST Europe with 8 percent and Holtzbrinck Ventures with 8 percent.
The Berlin-based Samwer brothers’ Rocket Internet incubator replicates existing e-commerce business concepts, mainly from Silicon Valley, in markets outside the U.S. and China -- from Brazil to Nigeria to Myanmar. Zalando was one of those businesses.
Rocket is planning to announce its own share sale, probably in September, people familiar with the matter have said, signaling a revival in German IPOs. In meetings with investors ahead of its own IPO, Rocket has been benchmarking its business model against Chinese e-commerce giant Alibaba Group Holding Ltd., they said.
Berlin has hosted a vibrant startup scene that includes music streaming service SoundCloud Ltd. and scientific paper portal ResearchGate. The city’s Earlybird Venture Capital GmbH has attracted a co-founder of LinkedIn Corp. And Google Inc. has added a European venture capital office in London to tap emerging companies in Berlin, Paris and elsewhere.
“Listing our shares on the stock market is the next logical step in Zalando’s evolution,” management board member Rubin Ritter said. The offering “provides us with more flexibility to pursue our long-term growth ambitions.”
The company said that its distribution system can handle twice the sales generated in the 12 months ended June 30. Zalando may post sales of 2.4 billion euros for this calendar year, Kepler Cheuvreux estimates. That compares with 1.76 billion euros in 2013.
Zalando’s second-quarter net income was 29 million euros, compared with a 33.5 million-euro loss a year earlier. Its average order size was 65.70 euros, up from 58.40 euros.
The company also said today that it signed a credit line worth 200 million euros for a five-year period to be used for general purposes.
The sale is being managed by Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group AG. Deutsche Bank AG and JPMorgan Chase & Co. have also been mandated as joint bookrunners.
Final European IPO preparations typically last about four weeks as the company to be listed meets with analysts and investors, then sets a price range and opens the sale to buyers.
At an event in a converted railway station in east Berlin last week, Zalando’s management told reporters the company is changing its marketing to emphasize fashion over home delivery. It previewed a new TV ad showing a model throwing a Zalando box through a screen, parodying Apple Inc.’s famous “1984” ad for the Mac.
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