Net-a-Porter Deal Progresses
Yoox, the Italian fashion retailer which operates online, has put in a bid to purchase its rival, Net-a-Porter (NAP). The deal, which will be share-only, will create a new industry leader for the luxury online market with combined sales estimated at approximately $1.4 billion (1.3 billion euros).
If the deal goes ahead, the owner of Net-a-Porter, Richemont, is set to be the owner of 50% of the Yoox/Net-a-Porter Group once it merges, but it rights for voting will not rise above 25%. In effect, Richemont will take a back seat when it comes to the day-to-day running of the business while Yoox takes charge. It will be the world’s largest upscale online fashion store.
Yoox boss and founder Federico Marchetti, who is a minority shareholder, will take on the role of chief executive. The company will continue to be listed in Italy and will stay incorporated.
An Increased Online Presence
Currently, the luxury goods market online makes up just 5% of overall luxury goods sales. A considerable number of brands are reluctant to expand into the online marketplace, fearing their customers will not receive the same quality of experience as they get when they come into a store. However, experts believe that an online presence will be absolutely essential for all brands as internet retail continues to grow exponentially. Executives are gradually beginning to understand that branching out into the online marketplace will be vital to remain in the game in the long term.
The proposed acquisition is expected to reduce operating costs for NAP and Yoox, including logistical, advertising, distribution, back-office and warehouse expenses. It is hoped that this will increase profit margins. The deal may also ensure Yoox retains luxury brands that would normally consider moving in-house after the initial start-up and once they become more experienced.
Combining NAP and Yoox works very well from a geographical perspective – Yoox is currently stronger in China and Japan, while NAP performs well in Australia, the Middle East and Britain. Both companies are doing well in the US marketplace, and the deal is likely to have a positive financial impact on both companies.
Following confirmation of the talks on Monday, Yoox shares rose almost 10%, and on Tuesday they closed up 11.1%. As expected, Richemont shares saw a downward trend of 2.1%.
If the deal is given the go-ahead by shareholders at Yoox when they vote in June, around 200 million euros will be issued as part of a growth fund initiative. According to a spokesperson for the Yoox/NAP Group, Richemont is likely to fund half of this figure. A number of additional investors are also said to be keen to participate. NAP will be handed over completely debt-free, despite a 30 million euro shortfall which is likely to be transferred to Richemont itself.