Daily Mail-backed Zipjet to clean up with Laundrapp merger

An on-demand laundry service which counts the Daily Mail’s parent company among its shareholders is in advanced talks with Laundrapp, a UK-based rival, about an all-share merger.

Sky News has learnt that the boards of Zipjet and Laundrapp have reached agreement on the terms of a deal, which is aimed at creating critical mass in the two companies' combined London operations.

Sources close to the deal said that Laundrapp would pay just over £17.5m for Zipjet, which also trades in Berlin and Paris.

While small in financial terms, the transaction is likely to attract significant attention in the tech investment community owing to the profile of the two companies and their shareholders.

The combined operation is expected to be based in London, with Berlin-based support functions will close.

Zipjet was set up by Rocket Internet, a Berlin-based investor which has backed start-ups such as the meal-kit provider HelloFresh and Westwing, an online furniture retailer.

DMG Media Investments, a subsidiary of Daily Mail and General Trust, holds a minority stake in the company.

The German-based laundry and dry cleaning app's backers also include the ventures division of Henkel, the consumer goods and chemicals group behind brands such as Right Guard deodorant.

Other investors in Zipjet include BSH Home Appliances Group, a joint venture between Bosch and Siemens.

Laundrapp has raised more than £20m in funding since its launch in 2015.

The company describes itself as 'the Uber of laundry' but - while it has expanded to more than 100 towns and cities across the UK - has struggled to build its business in a financially sustainable way.

The terms of the merger between the two apps, which will be structured as a takeover of Zipjet through the issuance of new B-shares in Laundrapp, are understood to have been proposed to shareholders in recent weeks.

Lorenzo Franzi, Zipjet's chief executive, will take the same role at the combined company.

The drive for consolidation among the two most prominent laundry apps operating in the UK underlines the difficulties that many start-ups have in gaining sufficient scale to reach economic sustainability.

Laundrapp and Zipjet recorded combined revenues in 2018 of just €8.8m in 2018, with more than 60% of Zipjet's sales being generated by its operation in London.

The companies are understood to be forecasting that they will break even by September 2021, although the combined company is expected to require millions of pounds in new funding to help it reach that point.

According to Laundrapp, the merged entity is also likely to explore the sale of its Berlin operation in an attempt to accelerate its path to profitability.

Neither Laundrapp nor Zipjet could be reached for comment on Tuesday.