Net-a-Porter’s owner Richemont will receive 50% of the combined Yoox Net-a-Porter Group but its voting rights will be capped at 25%.
Reuters/Paris/Milan
Italian online fashion retailer Yoox has agreed to buy Net-a-Porter, its upmarket rival, in an all-share deal that creates an industry leader in the booming online luxury market, with combined sales of €1.3bn ($1.4bn).
Net-a-Porter’s (NAP) owner Richemont will receive 50% of the combined Yoox Net-a-Porter Group but its voting rights will be capped at 25%. Yoox management will effectively be in charge of the combined business and Richemont will take a back seat.
“Today, we open the doors to the world’s biggest luxury fashion store,” said NAP founder Natalie Massenet, who will oversee editorial content of the group as executive chairman.
Yoox boss, founder and minority shareholder Federico Marchetti will become chief executive and shape strategy. “Between us, we have changed the fashion industry somehow and we will continue to change it,” he told reporters in a conference call on Tuesday.
Under the terms of the deal, NAP will be absorbed into Yoox and the combined entity will remain incorporated and listed in Italy.
The online luxury goods industry is still in its infancy, making up only around 5% of total luxury sales because many brands put off Internet expansion, worrying it would not offer customers the same high-end experience as their stores.
But many executives now believe the Internet has redrawn battle lines between luxury brands and will be vital in driving future sales, particularly among the so-called Millennials, web-savvy customers born between 1980 and 2000.
Online luxury is not yet very profitable: both Yoox’s and NAP’s operating margin is less than 5% compared with more than 25% for most big luxury brands. But the pair hope their bigger size will help to cut warehouse, logistical, back-office, advertising and distribution costs.
Yoox operates the online sales of fashion brands such as Ermenegildo Zegna and Kering’s Bottega Veneta and Saint Laurent. It also sells items at a discount. Analysts said the deal could help to boost Yoox’s chances of retaining luxury brands that might otherwise have wanted to take their online operations in-house once they gained experience.
“I’m positive on the outlook for the online luxury market. I believe it’s a structural change that will gain traction as younger generations of more ‘digitally minded’ managers get to the top,” said Gian Luca Pacini at Intesa Sanpaolo in Milan.
NAP specialises in current season and off-the-runway items, and advises customers on what to wear them with. It also publishes the “shoppable” fashion magazine Porter online and in print with a circulation of 152,500.
NAP had adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of €58.3mn on revenue of €753.8mn in 2014, according to slides presenting the deal, while Yoox made EBITDA of €50.1mn on sales of 524.3mn. NAP has an average order value of €481while Yoox’s is €202.
Marchetti said the two companies were complimentary also from a geographical standpoint as NAP had a greater presence in Britain, the Middle East and Australia while Yoox was stronger in Japan and China.
The US would remain the two companies’ No1 market, followed by Britain, Italy and the rest of Europe.
Marchetti said NAP would have the same valuation as Yoox once the deal was completed in September. Analysts valued NAP at around €1.5bn, above Yoox which stood at €1.32bn on Friday before news of a possible deal came out.
Yoox shares – which had risen nearly 10% on Monday after Yoox and Richemont confirmed Reuters reports they were in talks – closed up 11.1% at €25.75 on Tuesday, valuing the company at €1.6bn. Richemont shares closed down 2.1%.
The combined business will generate annual synergies of around 60mn euros by the third full year, the two companies said.
