At the end of March, the largest Polish e-commerce platform Allegro completed the takeover of the domestic e-shop group Mall Group. In addition to cash, the Poles paid Czech businessmen shares of Allegro. However, their value is constantly declining – they have fallen by 33 percent since the announcement of the store at the beginning of November last year.
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Allegro announced last year that it is buying Mall Group and also the logistics company WeDo from the investment groups PPF Group, EC Investments and Rockaway Capital for the price of 881 million euros (21.6 billion crowns). About forty-six percent of the purchase price was paid for in Allegra shares, the rest in cash.
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However, not all sellers received the same portion of cash and shares. According to the transaction documentation published by Allegro, PPF Group and EC Investments, which each owned 40 percent of the Mall Group, received most of the purchase price paid in cash. Specifically, each 231 million euros (5.7 billion crowns) in cash and about one percent of Allegro shares.
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Jakub Havrlant, the then head of the Mall Group, on the other hand, received the vast majority of the sale price in Allegro shares, namely 1.3 percent. Havrlant received “only” 11 million euros in cash, ie 270 million crowns.
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Adverse development
Together, the Czechs received 3.3 percent of the shares worth of 407 million euros (less than 10 billion crowns) in the shares of the Polish e-commerce group. Thus, one share was priced at PLN 55.98, although at the time of the transaction it was trading at PLN 44.50 (the average for the last few months). Today, however, Allegro shares are trading at 29.70 zlotys, and the value of the 3.3 percent stake today represents 5.8 billion crowns.
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“Allegro shares are now trading below the level of the transaction announcement, so the value of shares in sellers Jakub Havrlant, EC Investments and PPF Group is lower,” said Cyrrus portfolio analyst Tomáš Pfeiler.
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“Since the beginning of the year, the shares have been losing influence due to the wider negative sentiment on the stock exchanges in connection with the Russian-Ukrainian conflict. The last factor that contributed to the fall in prices is the news that eBay, which is a competitor for Allegro, will enter the Polish market, “he added.
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Allegro shares are falling.
New Czech shareholders of Allegro can sell the newly acquired shares no earlier than one year after the acquisition. The total value of the acquisition of a 100% stake in the Czech Mall Group e-shop and in the courier company WeDo was up to 975 million euros (23.9 billion crowns) at the time of the announcement.
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Mall Group’s debt was deducted from this value, so the purchase price was 881 million euros (21.6 billion crowns). The final price can be increased by up to fifty million euros (1.2 billion crowns) depending on the future performance of the Mall Group.
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A success story
For Rockaway Capital, it was the biggest deal and the culmination of a story that began in 2014, when Havrlant bet on e-commerce and began building e-commerce holding companies. At first, however, it did not look like that, because the Mall group generated losses that accumulated in billions of crowns.
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The struggle to return to black numbers has become a life challenge for Mall in recent years. The entire Mall Group has suffered losses for many years, and shareholders – mainly PPF and EC Investments – have had to invest heavily in modernization.
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“It simply came to our notice then. More than threefold appreciation of our investment. And we have also learned a lot of new things, “said Vladimír Mlynář, a member of the PPF Board of Directors after the transaction was announced.
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Allegro was acquired by the Polish company Mall Group and the logistics assets of WeDo in the Czech Republic, Slovakia, Hungary, Slovenia, Croatia and Poland. The transaction does not concern Vivantis, Mall Pay or Mall.TV and Košík.cz, which have already been separated from the Mall Group in the past.
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In addition to the Mall internet marketplace, the Mall Group also includes, for example, the CZC.cz e-shop with electronics. Allegro is controlled by the investment funds Cinven, Permira and Mid Europa Partners.
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