Zalanda Shops Stake in Frankfurt IPO

BERLIN ( The Deal) -- Zalando on Wednesday announced an initial public offering that will give investors a sliver of the Berlin fashion e-commerce group and an indirect stab at Zalando's parent, Web incubator Rocket Internet.

The company said it hoped to sell a 10% to 11% stake in new shares in an IPO in Frankfurt by year-end. Zalando shareholder AB Kinnevik, of Denmark, values the German group at 3.9 billion euros ($5.1 billion).

The online retailer has become famous in Europe for ads featuring customers screaming with glee at the arrival of their products.

Investors have been doing the equivalent at the prospect of gaining a piece of one of Berlin's fastest-growing startups and indirect access to Rocket -- investors interested in Rocket have historically pushed up shares of Kinnevik, which owns 36% of Zalando and 18.1% of Rocket, which is also Berlin-based.

"Becoming profitable in the first half of 2014 is a key milestone and once again highlights the attractiveness of our business model. Selling shares is the next logical step in Zalando's evolution," said Zalando management board member Rubin Ritter in a statement.

Rocket itself is also rumored to be preparing an IPO for this year.

In the first six months of 2014, Zalando sales jumped 29.5% to 1.05 billion euros, resulting in Ebit of 12 million euros following a loss of 72 million euros in the first half of 2013. It had 13.7 million "active" customers at the end of the first half, up from 11.6 million a year earlier.

The company sells men's, women's and children's fashions online in most European countries, taking a similar approach to U.S. rival Zappos.com. Rocket's founders, three brothers from the Samwer family, have been criticized for borrowing business plans but they retort by saying successful businesses are more than just ideas.

Zalando is also 17%-held by the Samwers' Global Founders Capital investment vehicle with Danish billionaire Anders Holch Povlse, Russian financial investor DST Global and German publisher Verlagsgruppe Georg von Holtzbrinck GmbH all having 10%, 8% and 8% Zalando stakes, respectively.

Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group are acting as joint global coordinators and joint bookrunners. Deutsche Bank AG and JPMorgan Chase & Co. are joint bookrunners. Jefferies & Co. and Stifel Nicolaus Europe are co-lead managers.

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