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By Emma Thomasson
BERLIN (Reuters) - German venture capital group Rocket Internet is bringing together its five emerging market fashion brands to create a company worth 2.7 billion euros (2.18 billion pounds) and simplify its structure before a likely stock market listing.
The deal, agreed with major Swedish investor Kinnevik, aims to untangle complex cross-holdings by investors in Rocket and its most successful start-ups before an initial public offering that could be announced as early as next week.
Zalando, Europe's biggest online fashion firm that Rocket Internet also helped launch, said on Wednesday it planned to list soon, joining a flurry of e-commerce flotations set to be crowned by Chinese giant Alibaba.
Rocket Internet is bidding to create the largest Internet empire outside the United States and China. It wants to replicate the success of Amazon and Alibaba in markets the U.S. and Chinese e-commerce groups have yet to dominate, such as Africa, Latin America, Russia and other parts of Asia.
Founded in 2007, Rocket is active in more than 100 countries, making revenue of $1 billion in 2013 via e-commerce and online marketplaces for everything from taxis to meal deliveries to domestic cleaners.
Rocket is set to announce it wants to list a stake of up to 15 percent to raise some 800 million euros of new capital, according to sources with knowledge of the plans.
SHARING EXPERTISE
Rocket Internet and Kinnevik, which holds an 18 percent stake in the Berlin-based firm, will combine Lamoda in Russia, Dafiti in Latin America, Jabong in India, Zalora in Southeast Asia and Namshi in the Middle East into a single entity, GFG.
The five fashion brands are among the Rocket companies with the highest sales. Rocket's other top start-ups are online furniture and homeware firms Home24 and Westwing, and general merchandise e-commerce companies Lazada, Linio and Jumia.
The five fashion companies would share expertise in areas such as developing online brand presence, building infrastructure such as delivery networks, creating private labels and developing mobile applications.
Rocket and Kinnevik also expect economies of sale in sourcing international brands and global marketing. They hope the combination will help the company attract and retain staff and speed up the development of technology platforms.
The companies cover 23 countries with a fashion market worth 330 billion euros and 2.5 billion people, who are shifting rapidly to shopping online.
The five companies to be combined had 4.6 million active customers and more than 7,000 employees as of June 30. Their websites received 8.4 million orders and generated 436 million euros ($573 million) of gross merchandise volume in the first half.
According to figures recently published by Kinnevik, the five made a combined operating loss of 232.3 million euros in 2013 on revenue of 452 million.
Since launching in 2011 and 2012, the five have attracted more than 1 billion euros in funding from investors including Kinnevik, Access Industries, Summit Partners, Verlinvest, Ontario Teachers' Pension Plan and Tengelmann, and still have about 350 million in cash as of June 30.
All direct and indirect shareholders will put their shares in a newly formed Luxembourg-based entity, with the three largest shareholders in the new group worth 2.7 billion to be Kinnevik with 25.1 percent, Rocket with 23.5 percent and Access Industries with 7.4 percent.
In another move to tidy up Rocket's structure, investor Holtzbrinck Ventures said last month it was exchanging stakes in Rocket companies for a 2.5 percent stake in Rocket Internet itself, valuing the whole firm then at about 4.4 billion euros.
(Additional reporting by Alexander Huebner in Frankfurt; editing by David Clarke)