By John Revill
ZURICH-- Cie. Financière Richemont SA plans to combine its
online fashion retailer Net-A-Porter with Italian Web-based
clothing company Yoox SpA in an all-stock deal that will create an
Internet shopping giant with yearly revenue of more than $1.4
billion.
Yoox Net-A-Porter Group will combine two of the biggest and best
known websites for luxury clothing and accessories, a
nascent-but-growing online market. Net-A-Porter, founded in 2000,
sells high-end brands ranging from Jimmy Choo shoes to Balenciaga
ladies wear. Yoox manages Internet sites for luxury brands,
including Valentino and Armani, and has its own multibrand online
stores.
The deal represents a turnaround for Richemont. The Geneva-based
group has been trying to build up Net-A-Porter on its own after
acquiring the bulk of the firm from founder Natalie Massenet in
2010. Richemont, which also owns jeweler Cartier and watchmakers
Piaget and IWC, had previously said that it wouldn't sell any of
its businesses, preferring to invest in struggling lines rather
than getting rid of them
Richemont said on Tuesday it will inject Net-A-Porter into Yoox
in return for a 50% stake in the combined business which will
retain Yoox's stock-market listing in Milan.
Richemont said its voting rights in the merged company will be
limited to 25%, a provision designed to protect its
independence.
The luxury goods group also has undertaken not sell half of its
Yoox Net-A-Porter stake for three years and expects to take part in
a planned EUR200 million ($214 million) capital increase to finance
future growth and attract new strategic investors.
Federico Marchetti, the founder and chief executive of
Milan-listed Yoox, will become the combined company's CEO,
Richemont said. Ms Massenet, currently executive chairman of
Net-A-Porter, will take on the same role at the enlarged
company.
Yoox Net-A-Porter will go head-to-head with online retail
giants, such as Amazon.com Inc., which are also branching out into
the luxury goods market, as well as department stores, which are
increasingly selling their inventory online. In addition, the
company will compete with fashion brands themselves, many of which
are selling directly to consumers via their websites.
In a statement, Richemont Chairman Johann Rupert acknowledged
the growing competition the company faces, saying the decision to
combine Yoox and Net-A-Porter was driven by a need to maintain
scale.
"Established business models are being increasingly disrupted by
the technological giants," Mr. Rupert said. "It is with this in
mind that we believe it is important to increase leadership and
size to protect the uniqueness of the luxury industry."
Milan-based Yoox has a market capitalization of EUR1.3 billion
($1.4 billion), while Exane BNP Paribas analysts estimate
Net-A-Porter could be worth around EUR1.5 billion. Combined, the
two companies had 2014 sales of EUR1.3 billion and operating profit
of around EUR108 million after certain costs such as staff
incentive plans.
The deal requires the approval of Yoox shareholders and is
expected to be completed in September.
Richemont took control of Net-A-Porter in a 2010 deal that
valued the online retailer at GBP350 million ($525 million).
Richemont said it would book a paper profit of EUR317 million on
the transaction.
Write to John Revill at john.revill@wsj.com
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