Swedish investment fund Kinnevik, German incubator Rocket Internet and other co-investors announced yesterday an agreement to form a new global fashion e-commerce group by combining five leading businesses across the world. These include Dafiti (Latin America), Jabong (India), Lamoda (Russia & CIS), Namshi (Middle East) and Zalora (South East Asia & Australia).
Christened Global Fashion Group (GFG), the group will cover no fewer than 23 countries with a 330 billion euro fashion market and population of over 2.5 billion people “who continue to move rapidly online and purchase via e-commerce,” Kinnevik stated.
“GFG will market a wide assortment of leading international apparel and accessories brands, a tailored selection of highly engaging internally developed brands and local assortments developed for specific ethnic markets notably in India, Indonesia and the Middle East.” In addition, “GFG will continue to explore the development of adjacent categories like personal care. Mobile commerce will remain a core focus for GFG through the continued development of mobile applications aimed at the growing smartphone user base in its territories.”
Global synergies with local autonomy
The new group’s entities will run their businesses independently under the existing brand names. They will continue to be led by their respective founders and management teams with “a few select additions to the leadership team intended to foster group synergies and the pursuit of global initiatives,” according to Kinnevik’s press release.
“The merger solely creates a new holding company that allows to leverage additional synergies such as a stronger position in the procurement markets, knowledge transfer, attraction of talent and financial ressources,” confirmed Lamoda.ru CEO Niels Tonsen in an exchange with East-West Digital News.
“This will lead to an even better experience for us internally but also for our customers,” the German expat added, while confirming his goal to “become the number one online destination for fashion in Russia and the CIS.”
The shareholders in the five existing e-commerce companies will contribute their shares into a newly formed Luxembourg-based entity. The three largest shareholders in GFG will be Kinnevik, Rocket Internet and Access Industries, with 25.1%, 23.5% and 7.4% ownership interests, respectively. For the purposes of the combination, the five companies were valued according to their last funding rounds, resulting in a valuation of 2.7 billion euros for the combined entity. The agreed transaction, however, is subject to binding rulings by fiscal authorities and antitrust approval. Closing is expected in late 2014.
The Board of Directors of GFG will include Lorenzo Grabau, CEO of Kinnevik as Chairman, Oliver Samwer, CEO of Rocket Internet as Deputy Chairman and “representatives of the other largest shareholders” who are yet to be named.
Hefty contribution from Lamoda
Lamoda.ru, the Russian component of the group also operating in Kazakhstan and Ukraine, is bringing a significant contribution in financial terms. For the first six months of 2014, GFG generated 436 million euros of Gross Merchandise Volume, having received 8.4 million orders from 353 million unique visitors. In 2013, GFG’s IFRS revenues amounted to 406 million euros, excluding taxes, according to Kinnevik.
Of this amount, Lamoda’s revenues, which have not been disclosed, may have reached one third or more (180 million euros or $240 million, including VAT), according to the calculations of an expert pool from Data Insight, EWDN and Enter.
“Since launch in 2011 and 2012, the five e-commerce companies have attracted funding in excess of 1 billion euros from Kinnevik, Access Industries, Summit Partners, Verlinvest, Ontario Teachers’ Pension Plan, Tengelmann and a number of other investors. With approximately 350 million euros of cash as of 30 Jun 2014, GFG is very well capitalized to continue to execute on its plans and capture its growth opportunities,” according to Kinnevik’s press release.
Lamoda.ru has been particularly “well capitalized” with giant fundings in 2012 (around $60 million) and 2013 ($130 million), complemented recently by a modest but symbolical 10 million euro capital injection from IFC, an entity of the World Bank.
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