fashionette’s extraordinary general meeting had a positive outcome, paving the way the promising business combination with The Platform Group. With athe vast majority of 97%, attending shareholders voted in favor of the proposed measures. Firstly, a capital increase of € 11.07m against contribution in kind. Secondly, the renaming of fashionette AG into The Platform Group AG and thirdly, increasing the company’s authorized capital by € 8.6m to pave the way for further growth initiatives. Following the official entry in the commercial register, the transaction is seen to close in the coming weeks and we expect an active capital markets communication on The Platform Group’s mid-term strategy to follow-suit.

The volume of the proposed capital increase corresponds to the value ratio of fashionette and The Platform Group of 1 to approx. 1.7861. The ratio has been derived from an external auditor opinion, which values fashionette at € 87.1m and TPG at € 155.6m.

In FY22, TPG generated c. € 173m revenues and € 15m adj. EBITDA. Hence, the combined entity generated pro-forma revenues of € 338m and € 15.4m adj. EBITDA in FY22. Considering fashionette’s market cap of € 43.1m, TPG should currently be valued at c. € 78m and c. € 98m EV, which would translate into c. 5x EV/EBITDA FY22 for TPG. Hence, the combined entity would be trading a an EV of € 147m, implying an attractive 5.8x EV/EBITDA FY23e considering the sound profitability of The Platform Group (8.7% EBITDA margin in FY22).

In our view, the business combination looks promising. With fashionette’s exposure to the structurally growing and highly profitable luxury fashion vertical, the company should be poised for profitable growth in the coming years. fashionette looks set to capitalise on TPG’s know-how with regards to tech, data, marketing and logistics. The business combination should also offer cross-selling opportunities.

CEO Benner aims to transform fashionette into a true luxury eCommerce platform in the mid-term. By the end of September 2023, 130 B2B partners will be connected to the ecosystem and the number should rise to 200 until year-end. This looks set to result in an elevated customer experience thanks to assortment breadth / depth and profitability is seen to increase structurally as the platform approach is capital-light and fashionette carries less inventory risk.

BUY with an unchanged PT € 23.00, based on DCF.