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Authors
Advisor(s)
Abstract(s)
The apparel and fashion retailing business is currently in transition from brick and mortar to
online. The fast fashion giants Inditex and H&M face competition from fashion e-commerce,
while struggling themselves with their online rollout. Simultaneously, the stars of online-only
fast fashion retailing, like ASOS and Zalando, experience aggressive competition that causes
pricing pressure and shrinking margins. In contrast to ASOS’s market capitalizations over one
year ago, with price-earnings ratios above 100, the stand-alone valuation indicates that ASOS
is currently trading close to fair value, which makes it an attractive takeover target. Acquiring
ASOS would enable Inditex to efficiently enter e-commerce with a famous online-only brand.
ASOS shareholders could exit their investment, leaving the company with a strategic investor
to enable further expansion. The strategic fit allows for synergies to increase the valuation of
the combined firm. Selling Inditex products on the ASOS marketplace and extending ASOS’s
deliver-to store option with the Inditex store network would increase sales. Cost synergies are
expected from the consolidation of sourcing and manufacturing as well as the rationalization
of administrative and organizational redundancies. Overall, synergies of approximately €12bn
would add shareholder value of approximately 11,47% to Inditex’s current market cap. ASOS
shareholders will be offered €66,75 or 2,25 Inditex shares per ASOS share, respectively 30%
premium on fair value. The mix of cash and stock enables Inditex to utilize its cash pile, avoid
leverage and align interests.