Danske Bank kommentar: Kinnevik – Intends to distribute the entire stake in Zalando

Kinnevik (MW): Kinnevik has proposed distributing its entire stake in Zalando to its shareholders. The stake is valued at around SEK55bn i.e. it represents just less than 50% of Kinneviks entire net asset value of SEK114bn at end Q4 20. The distribution has been proposed to quote “balance the portfolio and focus on younger high-growth and increasingly unlisted, businesses”. Our suspicion is that with the recent growth in the Zalando share price the holding has simply become to large relative to Kinnevik leaving it’s share very susceptible to swings in the Zalando share. We see it as positive that some risk concentration could be removed but also negative that the asset base will be substantially lower relative to gross debt. However we stress that since Kinnevik was net cash at end Q4 20 its debt to asset ceiling of 10% will not be breached due to this exercise. The deal has received preliminary approval from Kinnevik shareholders, representing 30% of the shares and 50% of the votes. Overall we see this as credit negative if completed.