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A well-heeled merger? Yoox snaps up Net-a-Porter

So Amazon isn't buying Natalie Massanet's baby then.

by Rachel Savage
Last Updated: 03 Sep 2015

An oh-so on-trend deal or a fashion disaster waiting to happen? Italy’s Yoox has confirmed an all-share merger with British counterpart Net-a-Porter, creating the world’s biggest online luxury fashion retailer.

Last week, it had been rumoured Net-a-Porter was about to be snapped up by Amazon, which isn’t exactly known for the quality and good taste of the clothes sold on its site. But it seems Net-a-Porter’s owner Richemont, which will hold 50% of the post-merger shares for at least three years, but only 25% of voting rights, wanted to make sure it stayed a bit more exclusive.

‘Established business models are being increasingly disrupted by the technological giants,’ Richemont chairman Johann 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.’ Not that behemoths and uniqueness normally go together, but there we go.

The value of the deal wasn’t revealed, but the combined company had net revenues of €1.3bn (£940m) in 2014. Richemont, which owns everything from Cartier to Chloé and Ralph Lauren, said the newly-spawned, Italian-listed Yoox Net-a-Porter Group would raise up to €200m when the tie-up is finalised in September.

That’s subject to shareholder approval, but probably won’t be an issue: Yoox’s shares were up almost 9% in mid-morning trading in Italy, although Richemont’s Swiss-listed shares fell almost 1%.

Yoox founder Federico Marchetti will be the chief executive, while Net-a-Porter’s Natalie Massanet will hold onto the executive chairman role she holds currently. Both set up their respective businesses in 2000 at the height of the dotcom bubble.

Net-a-Porter doesn’t turn a profit – it was £10m into the red in the year to March 29 2014, according to accounts filed at Companies House (on sales of £533m, which have increased 268% since Richemont bought the site from Massanet in 2010). That 2014 pre-tax loss was slightly less than the £10.4m it lost a year earlier and it made £22m of 'operating profit', when apparently pesky additions such as £18m for share incentive plans and an £8m 'shared services recharge' from Richemont are excluded. Yoox, on the other hand, which sells overstocked items from the Louis Vuittons and Diors of the world and also operates fashion house’s websites for them, made €14.8m from revenues of €524m.

Why, then, does it need to burden itself with a loss-making competitor? As Rupert hinted at before, the sector is being watched hungrily by the likes of Amazon. Meanwhile, analysts have speculated of late that luxury brands will increasingly bring their online operations in-house. For Richemont, it’s probably a pretty lucrative way out before the upheaval really gets going. Whether bigger will be better for Yoox, though, remains to be seen.

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