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 Net-a-Porter (NAP) owner Richemont will receive 50 percent of the
combined Yoox Net-a-Porter Group but its voting rights will be
capped at 25 percent, putting Yoox effectively in charge of the
combined business.
"Today, we open the doors to the world's biggest luxury fashion
store. It is a store that never closes, a store without geographical
borders," said NAP founder Natalie Massenet, who will oversee
editorial content and advertising of the new 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," Marchetti told journalists in a
conference call on Tuesday.
STILL SMALL
The online luxury goods industry is still in its infancy, making up
only around 5 percent 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 will be key to 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 percent compared with more than 25
percent for most big luxury brands such as Gucci or Prada.
But the pair hope their bigger size will help cut warehouse,
logistical, back-office and distribution costs, lifting margins.
Yoox operates the online sales of fashion brands such as Ermenegildo
Zegna and Kering <PRTP.PA>'s Bottega Veneta and Saint Laurent and
also sells items at a discount.
Analysts said the deal could help 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, which is regarded as having helped make online shopping an
entertainment experience, specializes in current season and
off-the-runway items and advises customers on what to wear them
with. It also published the fashion magazine Porter.
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Marchetti said NAP would have the same valuation as Yoox once the
deal was completed in September. Analysts valued NAP at around 1.5
billion euros, above Yoox which stood at 1.32 billion euros on
Friday before news of the potential deal came out.
Yoox shares, which gained already nearly 10 percent on Monday after
Yoox and Richemont confirmed Reuters reports they were in talks,
were up more than 8 percent by 0501 EDT at 25.14 euros, valuing Yoox
at 1.56 billion euros.
The combined business will generate adjusted earnings before
interest, tax, depreciation and amortization (EBITDA) of around 108
million euros in 2014 and annual synergies of around 60 million
euros by the third full year, the two companies said.
If Yoox shareholders approve the deal in June, the new group will
launch a rights issue of around 200 million euros ($216 million) in
the fall to fund growth, with Richemont expected to fund around half
the sum, a spokesman for the Swiss group said.
Marchetti said strategic investors keen to participate in the
capital increase could include luxury brands but gave no further
details.
Richemont has agreed to a lock-up period of three years regarding
half of its stake, or 25 percent, which analysts said they would
expect the Swiss group to eventually sell.
The group will appoint two members of 12-member board.
Marchetti, who currently owns over 7 percent of Yoox, said he
planned to remain a shareholder.
(Additional reporting by Katarina Bart in Zurich; Editing by Sophie
Walker)
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