Yoox revives talks with Richemont on Net-a-Porter deal

March 30, 2015 09:33 AM

(Bloomberg)—Yoox SpA, the Italian online fashion retailer that is No. 78 in the Internet Retailer 2014 Europe 500, revived talks with Cie. Financiere Richemont SA over a possible link-up with the Swiss company’s Net-a-Porter unit.

The “potential business combination” follows speculation that the businesses may merge amid increasing competition in web retailing of luxury goods. Confirming the talks Monday, Yoox and Richemont said in separate statements they will update investors “as appropriate.”

Richemont could decide on Net-a-Porter’s future as soon as this week, according to people familiar with the situation, who asked not to be identified as the matter is confidential. Officials at the two companies declined to comment.

“A potential combination between Yoox and Net-a-Porter could create the market leader in the luxury online industry,” Citigroup Inc. analyst Mauro Baragiola said in a note. “If such a deal were to go ahead, we see Richemont’s likely dominance in the combined entity as the only potential negative. This could be overcome via a subsequent partial placement in the market or a disposal to a corporate buyer.”

Earlier negotiations between Geneva-based Richemont and Yoox stalled in 2013. Richemont, the maker of Cartier jewelry, has held talks with banks to discuss options for Net-a-Porter, people familiar with the situation told Bloomberg News in November. These included a sale or an initial public offering of the London-based company, the people said at the time.

The talks with Yoox come ahead of the triggering of a compensation plan involving Richemont and Net-a-Porter’s senior executive team. The agreement entitles the online retailer’s founder Natalie Massenet to a payout on March 31 based on the increase in Net-a-Porter’s equity value since Richemont acquired all of it five years ago.

Yoox gains

Yoox rose 7.9% to 22.75 euros at 1:26 p.m. in Milan, the most since January 2014, giving the company a market value of about 1.4 billion euros. Richemont fell 0.8% to 79.25 francs in Zurich.

Richemont bought the two-thirds of Net-a-Porter it didn’t already own in 2010 in a deal that valued the e-commerce company at 350 million pounds ($519 million). Net-a-Porter, which had revenue of 630 million euros in 2014, could be worth about 1.5 billion euros based on two times estimated 2015 sales, according to Citigroup.

Net-a-Porter, which was set up by former fashion journalist Massenet in 2000, has been without a CEO since July. The company sells $1,100 Gucci sandals and $4,290 Miu Miu leather coats on the Net-a-Porter website, and also operates men’s e-commerce site Mr. Porter and online outlet The Outnet.

Competition intensifying

Yoox, which was founded by Federico Marchetti also in 2000, designs and manages online stores for more than 30 fashion and luxury-goods brands. The company, which operates an e-commerce venture with Gucci-owner Kering SA, also sells products via the, and multibrand websites.

Competition is intensifying in Web retailing of luxury goods as department stores move online and major online malls such as Inc. develop dedicated sections. Neiman Marcus Group Ltd. agreed to buy in September.

“Since we bought Net-a-Porter in 2010, we have experienced much more competition,” Richemont chief financial officer Gary Saage said in November. “That competition manifests itself in lower operating margins than we originally thought.”

Makes sense?

Though Saage also said in November that Richemont hadn’t reversed a decision to keep all its brands, disposing of Net-a-Porter would make sense, according to Citigroup. The online retailer lacks obvious industrial, cost and commercial synergies with the rest of the group, analysts including Baragiola wrote in a report this month.

The upside for Yoox and Net-a-Porter is less clear, according to analysts at Exane BNP Paribas. While there are likely to be cost savings and the combination may help attract partners and suppliers, “to an extent the business models are opposed,” analysts including Simon Bowler wrote Monday.

“If brands directly embrace online, as Yoox would encourage, then the need for an aggregator business model such as Net-a-Porter diminishes,” they wrote. “The clash of culture and ideology may prove difficult to integrate.”




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