Regulatory News / Latest Report

Inside information - execution of agreement to acquire Mall Group a.s. and WE|DO CZ s.r.o.

November 4, 2021 21:00 CET

Current report No. 14/2021

Legal basis: Article 17 sec. 1 of MAR - inside information

Acting pursuant to Article 17 sec. 1 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC, and 2004/72/EC (the "MAR"), with reference to the current report No. 13/2021 dated 4 November 2021, the Board of Directors of (the "Company", "") hereby gives notice that negotiations to acquire: (i) 100% of the shares of Mall Group a.s. (excluding certain of its subsidiaries and businesses that have been or are to be carved out as described below); and (ii) 100% of shares of the logistics company WE|DO CZ s.r.o. (together the “Target”) have successfully concluded. As a result, on 4 November 2021, the Company and sp. z o.o., a Polish subsidiary of the Company (""), entered into a share purchase agreement (the "SPA") related to such acquisition (the “Transaction”).

Moreover, on the same date both the Board of Directors of and the management board of have granted their consent to enter into the SPA and the consummation of the Transaction.

The SPA has been concluded by and between and as the buyers and EC Investments a.s. (owning 40% of the shares in Mall Group a.s.), BONAK a.s. (owning 40% of the shares in Mall Group a.s.), Rockaway e-commerce a.s. (owning 20% of the shares in Mall Group a.s.), and Titancoin International a.s. (owning 100% of the ownership interest in WE|DO CZ s.r.o.) as the sellers (jointly the "Sellers" and all together the "Parties").

The Company notes that Koš s.r.o., Mall TV, and Mall Pay s.r.o. have already been carved-out from the Mall Group a.s. capital group and are no longer subsidiaries of Mall Group a.s. Moreover, it is envisaged that Vivantis a.s. will be carved-out from Mall Group a.s. prior to the closing of the Transaction. However, if Vivantis a.s. is not carved out by 31 December 2021, the Company will apply for additional regulatory clearances so that if it is necessary, the Transaction could be completed including Vivantis a.s.

The Transaction perimeter comprises the e-commerce segment in Czech Republic, Slovakia, Slovenia, and to a smaller degree in Hungary, Croatia, and Poland. In FYE Mar-21, Mall Group achieved a GMV of EUR 915 million, gross margin of 14% and breakeven EBITDA. In its main countries of operations the Target had leading shares in the e-commerce sector, being #2 in Czech Republic and Slovakia and #1 in Slovenia with ca. 9%, 5% and 24% segment shares respectively (based on e-commerce segment GMV 2020 by country). In the fiscal year ended 31 March 2021, the Target had 4.7 million unique active customers and ca. 350 millions of domain visits. The Target also operates critical fulfillment and last mile infrastructure supporting its 1P and 3P businesses.

It is envisaged that the acquisition of the Target will be carried out by and will participate in the financing of the Transaction which may in particular include the issue of shares in as part of the consideration payable to the Sellers (as described below). The Company envisages that the financing of the cash component of the price (as described below) might be funded by both debt and equity.

To enable a complete and correct assessment of this information by the public, the Company is setting out its business rationale behind the Transaction in this report.

The Company is pursuing the Transaction in accordance with its previous announcements concerning its future development plans. The acquisition of the Target will, in the view of the Company, significantly increase the Group’s (the “Group”) Total Addressable Market and provide the Company with a sizable e-commerce segment share in several CEE countries beyond Poland, which would otherwise require significant time and investment to build organically with a less certain outcome. Specifically, the Transaction brings customers, merchants, web traffic and strong logistics capabilities. The Transaction also brings a highly trained and competent team with proven ability to develop successful e-commerce businesses. The Company envisages growing its joint talent pool to drive the development roadmap of the enlarged Group across CEE.

The Transaction will allow both groups to accelerate growth and expand customer and merchant bases across the region in a combined platform, which should significantly accelerate the development of the Target's GMV through expanded selection and improved user engagement in the third-party marketplace model.

The Target will be acquired for a price amounting to EUR 881 million (the "Price") based on a firm value valuation of EUR 925 million adjusted for debt and debt like items of EUR 44 million.

According to the SPA the Price can be paid in the following way:

(i) EUR 473.5 million in cash representing ca. 53.7% of the Price; and (ii) EUR 407.5 million in shares (the “Share Component”), representing ca. 46.3% of the Price.

The Price remains subject to a price adjustment mechanism following completion of the Transaction (i.e. transfer of legal title to the Target to, "Closing"). The final Price might be increased by up to EUR 50 million of price adjustment based on specific short term objectives connected with EBITDA/GMV margin and GMV growth in the Target’s financial year 2022, ending on 31 March 2022. Potential amount of such increase will be paid in cash after the completion of the statutory audit of the Target’s financial year ending 31 March 2022. has the right at its own discretion to either pay the Share Component of the Price in whole or in part through issuing shares of to Sellers or, alternatively, to pay the incremental amount of the Price in cash.

For the purposes of payment in shares, the Parties have agreed that such shares will be valued at an estimated 3M VWAP of Allegro shares on the date of signing of the SPA of PLN 55.98 and that such value will be re-calculated to EUR using the FX rate as of 29 October 2021 of 4.6208 PLN/EUR, i.e. will amount to EUR 12.11 per share. Hence the maximum number of shares to be issued by Allegro in exchange for the EUR 407.5 million consideration will not be higher than 33.649.039 representing 3.3% of total issued capital.

The SPA envisages that if decides to use the shares to pay the relevant portion of the Price, new shares will be issued and the subscription price of such shares will be set-off against's liability towards the Sellers to pay the appropriate portion of the Price.

Any shares in issued to the Sellers as consideration for the Target will be subject to a contractual lock-up lasting for 12 months following Closing. The lock-up is subject to exemptions, i.e. (i) the Sellers will be able to use the shares as a collateral for financing subject to financing bank agreeing to a similar lock-up; and (ii) the Sellers will be allowed to sell their shares in alongside Cidinan S.à r.l., Permira VI Investment Platform Limited and/or Mepinan S.à’s existing major shareholders on a pro-rata basis if those shareholders decide to decrease their stakes through an accelerated book building process.

The Price is agreed on the basis of a locked-box mechanism (i.e. the purchase price is fixed by reference to the Target's balance sheet position as at 31 March 2021) and therefore, the SPA contains customary provisions as to the lock-box pricing, including leakage and permitted leakage provisions.

Additionally, if Closing takes place after 4 April 2022 (inclusive), the SPA provides that the Price will be increased prior to Closing based on a ticking fee mechanism which envisages that the Price will be increased by an interest rate of 3% per annum, such interest to accrue daily on from 4 April 2022 (inclusive) until the Closing date (inclusive). will give notice of the final amount of the Price and payment method in an appropriate current report.

Closing of the Transaction is contingent on the fulfilment of certain conditions precedent set out in the SPA, which include: (i) obtaining consents of the appropriate antitrust authorities, i.e. Czech Republic, Republic of Poland, Slovak Republic, Republic of Slovenia, and Ukraine and (ii) obtaining FDI clearance in Republic of Slovenia (the "Conditions").

The Conditions must be fulfilled (or waived in accordance with the SPA) before the long stop date, which is set at 30 June 2022 and will be automatically postponed to 30 September 2022 should the carve-out of Vivantis a.s. not be executed by 31 December 2021. Moreover, if identifies that additional regulatory conditions prove to apply, the long stop date will be automatically postponed to 30 November (or to 31 December 2022 if such additional regulatory conditions refers to Montenegro) but no later than to 15 February 2023. If the Conditions are not fulfilled (or waived) before the applicable long stop date, either Party will have the right to terminate the SPA, which will result in the cancellation of the Transaction on the terms set out in the SPA. will publicly announce that the Conditions have been or have not been fulfilled in appropriate current reports..

If any of the Conditions is not satisfied by the long stop date for reasons other than those attributable to any of the Sellers and the SPA is terminated therefore, shall pay to the Sellers a break-up fee in the amount of EUR 50 million. Additionally, the Parties agreed on a mutual break fee (liquidated damages) in the amount of EUR 50 million which will be payable by a Party in breach as a non-exclusive remedy if the Conditions are met but Closing does not occur for reasons attributable to such Party.

Moreover, the Parties right to terminate the SPA is limited and applies only if any of the Parties fails to take actions required to enable Closing and repayment of related party debt of the Target and other situations specified therein which remain customary for such type of agreements.

The Parties have also agreed that cooperation with Vivantis a.s. shall continue for a period of 4 years from Closing, i.e. Vivantis a.s. shall continue to sell via the Mall Group a.s.’ platform or the Group's platform in a marketplace model. In addition,'s group and Heureka Group a.s. and its related entities ("Heureka") shall continue to cooperate for a period of 4 years from Closing. Moreover, the Sellers have granted a right of first offer (so-called ROFO) to applicable to disposal of Heureka by the Sellers. The right of first offer expires upon the earlier of: (i) the Target ceasing to cooperate with Heureka; or (ii) the value of such cooperation within any 12 months after Closing falling below 60% compared with the financial year 2021; or (iii) 30 months from Closing. The right of first offer enables to place its binding bid to acquire Heureka as the first bidder. If the binding bid is placed, the Sellers are free to sell Heureka within 12 months of the offer (i) to a third party at the price higher than’s bid; or to (ii)

Additionally, it is envisaged that at Closing the funding provided to the Target by the Sellers will be repaid or refinanced by a member of the capital group. With respect to transitional services, the SPA envisages that a detailed review and renegotiation of related party agreements (subject to some agreed exceptions) will be carried out prior to Closing.

The SPA contains customary liability provisions, including fundamental, tax and business warranties given by the Sellers concerning the Target and specifies the terms of the Sellers' liability in that regard. The SPA also provides for specific indemnities related to data protection, historic demerger, carve-outs, antitrust and certain tax issues.

The SPA contains also non-compete undertaking of the Sellers and their affiliated undertakings with regard to investing in certain types of e-commerce activity targeting customers from countries in which the Mall Group a.s. group operates as at the signing date for a period of 30 months following Closing as well as a non-solicitation undertaking of the Sellers and their affiliated undertakings companies regarding the senior managers of the Target.

The SPA and other documentation relating to the Transaction are governed by English law.

Following the Transaction will retain the right to the name and logo of the Target and the Sellers will only be able to use the Mall trademark for the purpose of MallPay and Mall TV for a transitional period of not more than 12 months from Closing. is a Luxembourg public limited liability company (société anonyme), registered office: 1, rue Hildegard von Bingen, L – 1282 Luxembourg, Grand Duchy of Luxembourg, R.C.S. Luxembourg: B214830.