ABOUT YOU Holding SE (YOU) Earnings Call Transcript & Summary

Hello, everyone, and welcome to our conference call intended to provide more color on the announced voluntary tender offer to acquire 100% of ABOUT YOU Holdings SE's share capital by Zalando SE. Today's conference call will be hosted by Hannes Wiese, Co-Founder and Co-CEO of ABOUT YOU. The corresponding slides to this presentation have been published on our IR website under the Publications section this morning. After the presentation, Hannes will be happy to answer your questions. Without further ado, I hand it over to you, Hannes.

Yes. Thanks, Frank, and good morning to everyone also from my side. Today is an exciting day for us as the combination of Zalando and ABOUT YOU will create a leading ecosystem for fashion and lifestyle e-commerce. Let me start our presentation with an overview of the key transaction terms and the structure of the transaction. Today, Zalando SE entered into a business combination agreement with ABOUT YOU Holdings SE regarding a public takeover offer for all outstanding shares of the company. Zalando offers ABOUT YOU shareholders a cash offer consideration of EUR 6.50 per share. This represents a premium of 107% to ABOUT YOU's 3 months volume weighted average share price. Our main shareholders, Otto, the Otto Family and HEARTLAND strongly support this offer and have committed to sell all the ABOUT YOU shares via hard irrevocable commitments to Zalando in connection with the public takeover offer. Sebastian, Tarek and I strongly support this offer as well. And also, we have committed to sell our shares in connection with the public takeover offer with hard irrevocable. We also intend to continue our work as management board of ABOUT YOU and a combined group after the completion of the takeover offer. We will talk about our reasoning in more detail on the next slides. Otto, HEARTLAND and management in total, representing approximately 73% of ABOUT YOU outstanding shares, this transaction is not subject to a minimum acceptance threshold. Conditions that the offer has are applicable merger control and regulatory clearances as well as other customary closing conditions. From a timing perspective, we expect that the offer document will be published by mid-January 2025 following BaFin approval. The closing of this transaction is expected in summer 2025. Let's now have a look at the transaction from a stakeholder perspective on Slide 3, starting with our shareholders. The offer price is, in our view, a fair price for ABOUT YOU, which is also confirmed by our financial adviser, who issued a fairness opinion for the transaction. The offer price of EUR 6.50 represents a premium of around 107% versus the 3-month volume weighted average share price, which is around EUR 3.14. -- versus yesterday's closing share price of EUR 3.90, the offer represents a premium of around 67%. This is well above what is typically observed in public takeover in Germany. From a perspective, we believe that this transaction provides great development potential. The talented workforce of ABOUT YOU is seen as a key asset by both Zalando and ABOUT YOU. Guiding principle of the combined group will be to retain the best talent and help them to capitalize on significant opportunities. We further feel that the company cultures of ABOUT YOU and Zalando are highly complementary with a lot of mutual support and learning potential. Hence, this transaction is not driven by overhead synergies, but rather by significant joint opportunities. Let's look at this transaction from a customer and partner perspective, starting with B2C. As part of a dual brand strategy in the combined group, ABOUT YOU will continue to execute on its style-led best of the fashion universe strategy. That means combining our current brand portfolio with a broad range of styles from our own labels and celebrity [ cops ] as well as independent sellers and manufacturers. B2B, SCAYLE and ZEOS, the B2B offering of Zalando will provide a complementary set of B2B products covering logistics, tech and other services. We are convinced that this go-to-market approach has huge differentiation and strategic potential for our customers and partners in both B2C and B2B vectors. Lastly, we are also convinced that joining forces and coordinating our ESG efforts will help us to contribute to positive change for a more sustainable and inclusive future of the fashion and lifestyle industry. Let's now move to Slide 4 to discuss in more detail why we believe that Zalando is the right partner to support our long-term ambitions. For us as founders, it is key to pursue a bold long-term vision. We believe that Zalando's strategy to build the ecosystem for fashion and lifestyle e-commerce provides an ideal framework to jointly pursue such a larger vision. And I believe that we can contribute a lot on this journey with our unique assets and capabilities. Zalando as partner in commerce, we will benefit from a coherent dual brand and go-to-market strategy to better serve the needs of our customers and partners. And on top, we will seek to leverage strong synergy opportunities in a combined group. In B2B, SCAYLE will focus on building the leading e-commerce solution for enterprise customers. In a combined group, this will be supported and accelerated with Zalando, ZEOS products. Further, our unique talent-based matters a lot to us, as this is the basis for future sustainable growth. With the Zalando team, we share this view, and we believe that this business combination creates strong upsides for both our people and our planet. Lastly, we will benefit from Zalando as an experienced partner with a mature financial and operational profile. Let's now look at the time line in more detail on Slide 5. Please regard this time that's indicative as the specific dates also depend on obtaining required regulatory approvals. Today, Zalando announced the decision to make a public takeover offer. Zalando has now 4 weeks to submit the offer document to BaFin, the German Federal Financial Supervisory Authority. The BaFin in turn will review the document and approve within 10 to 15 working days. After the review, the offer document will be published and shareholders have an acceptance period between 4 to 6 weeks. After this period, the results will be announced. This is followed by an additional acceptance period of 2 weeks where after the final results will be announced. Throughout the whole process, the regulatory filing and approval process is ongoing. Adding up the time line of all these different work streams leads to a closing of this transaction, which is expected in the summer of 2025. Shortly after the publication of the offer document, ABOUT YOU's management board and supervisory board will jointly publish a recent opinion. Subject to careful review of the offer document, of course, we intend to recommend that shareholders accept the offer. Let's conclude with our reasoning as to why we support the transaction on Slide 6. Firstly, the offer represents a fair value of ABOUT YOU an attractive premium of 107% versus the 3-month volume weighted average share price, and it enables our shareholders to realize immediate value from the transaction. Secondly, we see a clear strategic rationale for this transaction. Together, we will be able to serve a larger share of the market, improve our propositions for customers and partners and create synergies in a combined group. Thirdly, this transaction brings together 2 [ other ] teams with complementary cultures and capabilities, and we're excited to go for future opportunities together. Lastly, this transaction has a very high likelihood of success as all key shareholders support the deal. And they have underlined this with irrevocable commitments to sell all their shares in the company. High transaction certainty is important to us as it facilitates clear execution path going forward. In summary, we, as a management board, are convinced that this is an attractive deal for our shareholders as well as other stakeholders. And subject to careful review of the offer document, of course, we intend to recommend that shareholders accept the offer. That is also what we as management have committed to do. Let us close this presentation by thanking you all for your trust and support. We are now looking forward to answering your questions. Moderator, handing it back to you.

And our first question comes from Yashraj Rajani from UBS.

Congratulations on the deal. My question is regarding gross margin. So obviously, Zalando does significantly larger volumes than you all on the wholesale side of things. And they have mentioned on their call previous to this that there'll be a buying benefit on both platforms. So how much of gross margin improvement do you think you can have from an ABOUT YOU standpoint when it comes to actually better buying? And then the second point is on the marketing aspect. I mean, again, Zalando has a bit of a different strategy than you all when it comes to marketing. Do you think in terms of operating the platform, I mean, is the marketing strategy going to change? Or is that something that's going to be similar, but also have some efficiencies from working with Zalando?

Yes, sure. Thanks for the questions. Let's start with the one on gross margin. So the plan is certainly to cooperate also on the buying side when it comes to commercial aspects. And we certainly also expect an economic benefit from this. It's hard to really quantify this at this stage, but our ambition there certainly would be to have this in the low single-digit share as a percentage of revenues as a like-for-like uplift from commercial collaboration on the ABOUT YOU side. And the second piece on the marketing strategies, actually, already today, the way how we do marketing on ABOUT YOU and Zalando actually quite significant differ. ABOUT YOU heavily influenced a lot, focusing on social media channels, acquiring traffic via our user network and so on and so on. And going forward, we expect efficiency here from better coordinating our efforts. We could think about, for example, aligning on the promotional calendar to drive efficiencies from that. Of course, also when it comes to more like transactional online marketing standards to basically coordinate our efforts, so we don't inefficiently bid against each other and so on. So there's a couple of layers that can drive efficiencies, but these relate more to, I would say, coordinating efforts rather than integrating deeply in marketing and marketing tech.

And our next question comes from Roberts Sarah.

Just a couple from me. Firstly, can you provide some color on how you see your fulfillment network playing out post acquisition? At the moment, you currently lease warehouses versus Zalando who own their distribution centers. Is the plan to move capacity purely into the Zalando network? And if so, is there any cost that we should be aware of associated with either termination of those warehouses or termination fees in general in terms of logistics? That would be really helpful. And then secondly, on SCAYLE, specifically, you've spoken about the short- and long-term value creation opportunities at the CMD. Just curious as to now you're part of the wider Zalando Group, whether these ambitions would change slightly or whether you still see potential spinouts, for example, being part of SCAYLE story?

Yes, sure. Thanks for the questions. Let's start with the one on fulfillment. So the plan is to going forward, basically combine the networks and then operate from an integrated network, which will be beneficial for customers. It will also be beneficial, of course, from a cost efficiency perspective. How this will exactly be carried out is yet to be determined. To be fair here, I think this will also take some time given that these logistical processes are relatively long term and complex. So at this point, we couldn't exactly lay out as to how the integration take place and when. However, from an ABOUT YOU point of view, currently, we wouldn't expect material on top integration costs on the fulfillment side. On the SCAYLE piece, so of course, our ambitions haven't changed since what we communicated on the Capital Markets Day. We have discussed in the presentation that we expect on top -- also top line synergies from up and cross-selling possibilities. So I would say this could potentially be seen as on top potential as to what we've communicated on the SCAYLE event and a spin-off of the business or any external investors, I think this is not part of the discussion right now, and we wouldn't want to pursue this now that we are or we become part.

And our next question comes from Benjamin Kohnke from Stifel.

It would be around SCAYLE, please. And I think the sort of integration or the combination on the B2C side, on the fashion side, on the fashion retail side is pretty clear. I'm still struggling a little bit to see how you want to integrate SCAYLE into Zalando's technology offering or into the ZEOS offering. David said in the Zalando call that it will be probably all happen under the ZEOS brand, while at the same time, sort of leaving SCAYLE independent sort of. So I was just wondering if you could elaborate a little bit on your view how to best integrate SCAYLE into the ZEOS offering, how the -- let's call it, new go-to-market strategy will look like? And also to what extent could Zalando actually help you to expand your business in the United States, which we all understand after the Capital Markets Day is an integral part of the SCAYLE growth story.

Yes. Thanks for these questions as well. Let's start with the one on integration. So luckily, SCAYLE and ZEOS are already integrated to a certain degree. That is ZEOS partners can already sell on the ABOUT YOU platform via SCAYLE integration. So we are actually already live and that eases further integration steps and further optimization in these integrations. And what we would plan to do going forward is to, for example, also integrate other product pieces from the Zalando side into the SCAYLE. This could be, for example, around payment, this could be, for example, around size and fit so that we basically complement and extend the SCAYLE proposition for SCAYLE customers. And probably also the other way around, give more benefit to ZEOS customers by being able to SCAYLE tech for their own online destinations. So this goes both ways basically. And given that the integration has already taken place to a certain degree, we are also super confident that this will be executable rather short- to medium term than long-term. And in terms of go-to-market in the U.S., there is a couple of synergy potentials, for example, access to potential leads. I mean, Zalando Group obviously has a huge network and getting access and leveraging this together the network could be one aspect. Other aspects would be to jointly acquire U.S.-based customers that also want to expand their business in Europe coming from this joint e-commerce operating system and basically leverage the business that we would then have with U.S.-based companies in Europe also back to the U.S. So there's a couple of ideas how we can jointly pursue this. And yes, we'll [ bring ] sense and basically super excited of what's going to happen here.

[Operator Instructions] It seems that there are no more questions at this time. Therefore, I would hand over to Frank Bohme for any closing remarks. Please go ahead.

Thanks, everyone, for dialing in today. If you have any further questions, please reach out to the IR team directly. Have a nice day, and bye-bye.