Signa Sports United (SSU), which has become the largest dedicated sports e-tailer in the world, started trading on the New York Stock Exchange on Dec. 15 with an opening price of $9.07 per share, down from an issue price of $9.43, which gave the company a valuation of $3.13 billion. The stock price went up and down in early trading, reaching a high of $10.47 and a low of $8.82 before 2 pm. The company is trading on the NYSE under the ticker symbol SSU.
With 332,473,371 shares outstanding – in addition to 18,433,333 warrants – the opening price on the NYSE gave SSU a stock market capitalization of just over $3.0 billion. In March, representatives of Yucaipa and SSU agreed to a reduced valuation of $3.17 billion for the company, down from a previously agreed enterprise value of $3.85 billion, combined with an earn-out mechanism. The re-evaluation was based on a multiple-based valuation of online marketplaces and other peers of SSU, as well as on alternative bids. The valuation of $3.17 billion was based on 1.6 times projected revenues for the financial year ending in September 2022.
Just prior to the vote on the “business combination,” SSU indicated that the supply chain disruptions caused by the Covid-19 pandemic will adversely affect the group’s results, leading to sales ranging between €1.40 billion and €1.55 billion on a pro-forma basis in the current financial year, compared with a previous projection of $1,621 million. However, the company restated that “it is very confident demand remains strong, the strategic consolidation opportunities are huge and the mid and long-term mega-trends behind the business are accelerating. The Company expects to continue on its strong growth track once the COVID-19 related supply chain situation normalizes.”
The IPO followed the completion of a “business combination” between SSU and a special-purpose acquisition company, Yucaipa Acquisition Corp. (YAC), following a favorable vote by the latter’s shareholders on the previous day. As part of the transaction, Wiggle Chain Reaction Cycles (Wiggle CRC), a big U.K.-based bike e-tailer, merged into the group after its major shareholder, Bridgestone, sold its shares in exchange for equity.
With Wiggle contributing annual sales of around $500 million, SSU has turned into the world’s largest online bike retailing platform, about four times the size of Bike24, another German company that went public on the Frankfurt Stock Exchange in June, capitalizing on the recent cycling boom. Wiggle will be combined with SSU’s own online shops - Fahrrad.de, Bikester and Probikeshop - leading bikes to represent about two-thirds of the group’s revenues.
The business combination has provided SSU with gross proceeds of $484 million from institutional and high-tech investors, sovereign wealth funds and high net-worth individuals. Back in June, the partners in the blank-check merger were planning to raise a total of $645 million.
SSU was considering going public in 2018 with a valuation of around €1 billion, but it then decided to bring in new investors, which are presumably still holding shares in the group after its flotation. The new investors were two Asian retailers, Aeon Co. and Central Group, and a German insurance company, R+V.
Stephan Zoll, CEO of the Berlin-based group, said the transaction is “providing capital to bolster our position in the rapidly growing sports e-commerce & technology space and continue our expansion in Europe as well as into the United States. SSU is committed to a strategy of long-term value creation, and we are pleased to begin our journey as a public company to unlock the full potential of our platform and infrastructure.”
SSU has already indicated that it was planning to make other acquisitions, notably in the U.S., where it recently bought a couple of racquet sports retailers – Midwest Sports and Tennis Express - that are being combined with its own Tennis-Point website. SSU said in June that it was aiming to reach annual sales of around $3.7 billion by 2025 through organic expansion and new takeovers.
In documents presented to the U.S. Securities & Exchange Commission, SSU and YAC gave a list of “key attributes” to support SSU’s introduction on the NYSE:
- Business model supported by long-term megatrends in the large, fragmented sports retail market with high long-term growth in focus verticals
- Market leading sports specialist webshop brands with >7 million active customers
- Track record of robust, double digit organic growth with demonstrated ability to enter new markets
- Attractive financial profile evidenced by proven unit economics and expanding margins
- Opportunity to introduce new business models with accretive, technology driven platform and ecosystem expansion
- Clear path to global scale with unique global consolidation opportunity based on proven playbook
Citi acted as lead financial advisor to SSU. Moelis & Company acted as lead financial advisor to YAC. Jefferies acted as capital markets advisor to YAC. Citi and Jefferies acted as co-placement agents for an upsized private placement of common stock that took place prior to the IPO. Skadden, Arps, Slate, Meagher & Flom acted as lead legal advisor to SSU, and Kirkland & Ellis acted as lead legal advisor to YAC.
