Zalando Probed by German Regulator Over Disclosure Issue

Zalando SE is being investigated by Germany’s financial regulator after failing to note in its annual report that Danish billionaire and biggest shareholder Anders Holch Povlsen also held a stake in a company it bought last year.

The regulator said Friday that information on a related-party transaction connected with Zalando’s acquisition of rival online retailer About You may have been incorrectly omitted from the notes to its consolidated financial statements. Shares of Zalando fell as much as 10.6 percent before paring about half the decline.

Povlsen was a major shareholder in About You prior to the deal with a 20.81 percent stake. That was mentioned in the offer document, but not in the annual report. A Zalando spokesperson confirmed by email that this is the technical issue BaFin is probing.

“We would not expect a material fine in this instance, given this information had been previously publicly disclosed by Zalando,” Citi analysts including Monique Pollard wrote in a note.

The Zalando spokesperson said the company is in “close and constructive dialogue” with the German regulator, known as BaFin.

“According to Zalando’s assessment, this is a purely formal and materially insignificant aspect of the notes to the financial statements, as all relevant information regarding the acquisition of About You shares — including the companies involved, the transaction structure, and the purchase price — was already fully accessible as part of the public tender offer,” the spokesperson added.

About You was founded in 2014 by Sebastian Betz, Tarek Mueller and Hannes Wiese as a subsidiary of the Otto Group and has more than 12 million monthly users.

The company is active in all key markets in Europe and ships products to about 100 countries globally. Zalando’s purchase of About You was driven by the need to increase its share of the €450 billion ($512 million) European fashion and lifestyle market amid intensifying competition.

Besides gaining access to About You’s younger customer base, Zalando has said the combination will generate about €100 million a year in synergies or cost-savings in the longer term from shared logistics, payment infrastructure and commercial collaboration.

About You also operates a division called Scayle that helps other brands and retailers ramp up their digital businesses, which complements Zalando’s own e-commerce operating system Zeos.

When it bought About You, Zalando said it saw the US markets as “one of the biggest opportunities” for About You’s Scayle software

By Nicholas Comfort and Sonja Wind

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