Kinnevik Sells Final $244 Million Stake in Rocket Internet

  • The Swedish investment firm sold 10.9 million shares
  • The exit comes four months after Kinnevik sold prior stake

Kinnevik AB sold its remaining 217 million-euro ($244 million) stake in Rocket Internet SE, bringing to a close a volatile relationship with the German startup factory that had become marked by more frequent competition for investments.

Kinnevik on Wednesday said it was selling about 10.9 million shares in Rocket to institutional investors, or 6.6 percent of Rocket’s issued share capital. On Thursday, Stockholm-based Kinnevik put a price tag on the deal, saying it received 20 euros per Rocket share -- about 4.7 percent below the last closing price.

"Over the years, Rocket and Kinnevik kind of got into the same territory” as Rocket launched an investment fund to complement its in-house startup building, Kinnevik Chief Executive Officer Joakim Andersson said in an interview. "Rocket and Kinnevik became more and more competitors for investments.

Kinnevik plans to use proceeds of the sale to reduce net debt from about 3.5 billion Swedish kronor ($403 million) to about 1.5 billion kronor. Notwithstanding the parting of ways, Andersson called the eight-year Rocket relationship "one of the best investments Kinnevik has made," yielding an annual 90 percent internal rate of return and six times its invested capital.

"It’s been a great investment for us financially and has also helped us accelerate the build-up of our online and e-commerce business," said Andersson, who was named interim CEO after Kinnevik ousted its former CEO in December.

In February, the company sold a stake in Rocket valued at around 209 million euros, then around half its holding. The Swedish firm remains an investor in Rocket-backed companies including Global Fashion Group, Home24 and Westwing, though not in Delivery Hero AG, which said this week it’s going public in coming months. A spokeswoman from Rocket declined to comment.

Frayed Partnership

Shares of Rocket fell 2.3 percent to 20.49 euros at 9:37 a.m. in Frankfurt. Kinnevik rose less than 1 percent in Stockholm. While Rocket’s shares are up around 7.2 percent this year, they are down more than 50 percent since the company listed in October 2014. Prior to its current exit, Kinnevik was the third-largest shareholder in Rocket. Joh. Berenberg, Gossler & Co. acted as sole bookrunner in the latest transaction.

Kinnevik first invested in Rocket in 2009 after Chief Executive Officer Oliver Samwer cultivated a link with Kinnevik’s principal owner, Cristina Stenbeck, heiress to the Swedish firm that traces its roots to the 1930s. The Stockholm-based fund invested hundreds of millions of euros in Rocket and Zalando SE, the online apparel retailer that went public in 2014 and was backed by Rocket.

The relationship began to fray in 2015 when Samwer started a venture fund to co-invest in late-stage technology companies alongside Rocket. Then Kinnevik CEO Lorenzo Grabau told Samwer the fund would present a conflict. Last year, Kinnevik’s two representatives left Rocket’s board.

In December 2016, Grabau was pushed out of Kinnevik after failing to capture more broad-based consumer internet investments. Kinnevik’s chairman, Tom Boardman, has said the company finds itself competing with the likes of Google and Inc. for investments.

Digital Finance

The internet companies "are developing models in our sectors," Andersson said. Kinnevik "continues to look for new investment opportunities in digital, consumer-related brands," and is targeting online financial management and healthcare investments. In April, Kinnevik agreed to buy 18.5 percent of Swedish cable company Com Hem Holding AB for 3.7 billion kronor.

The exit by one of its longest-standing backers will come as a blow to Rocket, after its outlook for 2017 recently began to improve. On Tuesday Delivery Hero, the Berlin-based food-takeout business backed by Rocket, announced plans for Germany’s biggest initial public offering of the year. The deal is set to be the first IPO for a Rocket-backed startup since Zalando SE listed in 2014.

Kinnevik invested 155 million euros into Rocket from 2009 to 2013. During the five years prior to Rocket’s 2014 IPO, Kinnevik received 510 million euros in cash and stock dividends. It has now sold the entire shareholding for gross proceeds of 426 million euros, the Swedish company said.

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