Net-a-Porter, Yoox merger creates online fashion powerhouse

So after rumour and counter-rumour, it’s finally official – UK-based Net-a-Porter is to merge with Italian peer Yoox to create an online fashion retail giant with revenue of more than $1.4bn. Terms of late Monday’s deal were not disclosed.

On completion, the newly-named Yoox Net-a-Porter Group will receive around €200m ($217m) to fund growth and allow for the entry of “strategic investors”, Net-a-Porter’s Swiss parent Richemont said.

Combining Yoox’s high-end discounts offer with Net-a-Porter’s full price, current season offer will help the new business complete on a strong platform, particularly in Asia and the US, and allow the company to negotiate better courier deals and terms with client brands, analysts said. There was no word on where Net-a-Porter’s own existing discount offer (its Outnet off-price website) will fit in.

Why has this happened? It’s all about size, and power. Facing a business world dominated by companies like Apple, Google, Facebook and rumoured Net-a-Porter suitor Amazon, Richemont chairman Johann Rupert said Monday: “Established business models are being increasingly disrupted by the technological giants. 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. The merger of the two leaders will further enhance an independent, neutral platform for a sophisticated clientele looking for luxury brands.”

Richemont, which has long been known to want to divest Net-a-Porter, said Monday it has entered into a binding, conditional agreement for an all-share transaction that will create the kind of global fashion e-commerce giant Rupert believes the business needs to be. It will hold 50% of the share capital, although its voting rights will be limited to 25%, a provision designed to maintain its independence.

The deal is subject to approval by Yoox shareholders in June and is expected to be completed in September after final shareholder and regulatory approval.

The combined business will be based in Italy and quoted on the Milan bourse.

Net-a-Porter founder and chairman Natalie Massenet will serve as executive chairman of the new business while Yoox founder Federico Marchetti will be chief executive.

Rupert said Richemont “has been a pioneer in luxury e-commerce, first as a minority shareholder of Net-a-Porter in its infancy and then as a controlling shareholder since 2010. We are proud of Net-a-Porter’s achievements under the leadership of Natalie Massenet, ably assisted by a wonderful team of professionals.

Richemont said the transaction would generate a one-off, non-cash, accounting gain in its financial statements for the year ending March 31, 2016, of around €317m at both the pre- and post- tax levels. Excluding the one-off, non-cash accounting gain, the transaction is otherwise expected to be broadly earnings neutral in terms of Richemont’s net income for the financial year ending March 31 2016.

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