E-retailer Yoox will accelerate expansion after merger with Net-a-Porter
March 31, 2015 09:14 AM
(Bloomberg)—For Federico Marchetti, combining Yoox SpA, No. 78 in the Internet Retailer 2014 Europe 500, with Cie. Financiere Richemont SA’s Net-a-Porter is about more than staving off competition for luxury sales from department stores and online opponents such as Amazon.com Inc., No. 1 in the Internet Retailer 2014 Top 500 Guide.
“Together we will do a better job for the customer, for the brands and hopefully also will attract better people,” Yoox CEO Marchetti said Tuesday in a phone interview. “I wouldn’t call it a defensive strategy.”
Yoox agreed to buy Net-a-Porter for stock valued at about 719 million euros ($775 million), a transaction that will create the world’s biggest online luxury-goods retailer. The deal, which Marchetti described as “game-changing,” will give Richemont a 50% stake in a new company named YooxNet-a-Porter Group with annual revenue of 1.3 billion euros.
The transaction brings together companies that pioneered online luxury retailing since being founded 15 years ago. Yoox is known for its technological and logistical prowess as well as strong ties with brands such as Armani. Net-a-Porter, founded by former fashion journalist Natalie Massenet, developed the online magazine model, featuring interviews and style tips alongside products.
Each company operates three multi-brand sites, including discount offerings, while Yoox also designs and manages online stores for more than 30 fashion and luxury-goods brands. Yoox can help Net-a-Porter with systems and inventory management, while the London-based company can enhance the overall editorial offer and widen distribution, according to Marchetti.
“Our mutual interest is to leverage our respective strengths,” said Marchetti, who will lead the new entity. Massenet will chair the board and have “defined responsibilities” in areas such as editorial content, advertising strategy and fashion press, the CEO said. “It’s a long-term partnership.”
Richemont, which will be prohibited from selling half its stake for three years, didn’t make Massenet available for an interview.
Yoox shares surged as much as 14%, the most since August 2013, and were trading up 11% at 25.66 euros as of 12:55 p.m. in Milan. Richemont fell 1%.
The merger comes as competition intensifies in luxury Web retailing with brands taking greater control over distribution, department stores moving online and e-commerce giants developing dedicated sections. Neiman Marcus Group Ltd. agreed to buy Mytheresa.com in September, while Burberry Group Plc has agreements with Amazon and Alibaba Group Holding Ltd.’s Tmall.com.
Marchetti downplayed the challenges. Compared with the likes of Amazon, Yoox Net-a-Porter “is a different average ticket, a different customer and the brands are still reluctant, and will be reluctant, I think forever, to sell their luxury products on these big platforms,” he said. Department stores are getting more competitive “but we can move faster.”
While a growing number of luxury brands want a bigger, more profitable business online, increasingly they don’t want to do it by themselves, Marchetti said.
The executive also sought to allay concern that the merger could upset a joint venture that Yoox has with Kering SA to distribute many of the Gucci owner’s fashion and leather-goods brands, saying the French company “is happy with the deal.”
“The service that we are going to provide brands will be enhanced by the combination,” he said.
Yoox Net-a-Porter plans to sell as much as 200 million euros of stock after the transaction to raise funds for expansion in new markets such as the Middle East and gain new shareholders. These could include technology companies, luxury- goods makers and partners to open new geographies, Marchetti said, declining to elaborate.
“Together we will accelerate some of our plans,” he said.