On March 31 2015, Italian web-based clothier Yoox SpA agreed to purchase Net-a-Porter, the high-end fashion site controlled by Cie. Financière Richemont SA, in an all-stock deal representing an effort to strengthen their presence in the small-but-increasingly-competitive online market for luxury goods.

Transaction drivers

The new company will be called Yoox Net-a-Porter Group and it will be the world’s largest online retailer focused on luxury brands. Annual revenues and market value will account for €1.3 billion and €3 billion respectively.

The merger unites two companies with highly complementary businesses, identifying a joint base of 2 million high spending customers, with an average spend of €318, and over 24 million monthly visitors worldwide (15.2 from Yoox and 9 from Net-a-Porter).

Yoox agreed to buy Net-a-Porter from Compagnie Financière Richemont SA, which is a Switzerland-based luxury goods holding company that, through its various subsidiaries, it designs, manufactures and distributes premium jewellery, watches, leather goods, writing instruments, firearms, clothing and accessories. Among the most famous brands in its portfolio there are Cartier, Montblanc, Chloé, IWC, Jaeger-leCoultre, Ralph Lauren and others. In 2010, Richemont bought a controlling stake in Net-A-Porter that, at the time, was valued £350 million.

One of the most important drivers is in terms of “big data”. Adding Net-a-Porter’s data on luxury customer shopping choices to all the data that Yoox already has, this creates a huge potential source of wealth. Moreover, the existing platform will be expanded. Note that Yoox already powers sites for more than 30 brands, including Armani, Zegna and Valentino and has a joint venture with Kering to power the websites for many of its luxury brands including Bottega Veneta, YSL and Alexander McQueen.

The past years have witnessed a significant increase in the competitiveness in Web retailing of luxury brands. Department store are moving online and online malls such as Inc. are developing dedicated sections. Not surprisingly, one week before the deal was announced there was speculation that Amazon was interested in acquiring Net-a-Porter. The combined company will now have more heft in the market.

Another significant motivation for the deal is the consolidation of three distribution centres, five logistic hubs and 11 customer service centres. Synergies are expected to deliver approximately €60 million cost savings by 2018, which would be the third year following completion, primarily from combining logistics and technology operations.

Transaction Terms and Structure

The deal has been structured as an all shares merger by incorporation: a newco will be incorporated under Italian law and Richemont will detain a 50% of the shares, Yoox’s shareholders being the owner of the other 50%.

Richemont will appoint a maximum of two directors out of twelve, so eventually Yoox will effectively control the newco that will go under the name of Yoox – Net a Porter. Furthermore, at least half of the board will be composed by independent directors; Federico Marchetti and Natalie Manesset will serve respectively as CEO and President of the resulting company. Richemont’s voting rights will be limited to 25%, and the exceeding shares will constitute a special category with patrimonial rights but not voting ones. Interestingly enough, in case of a tender offer (Offerta Pubblica di Acquisto under Italian law) exceeding the 60 percent of the shares on the market, the non-voting shares owned by Richemont can be converted in ordinary ones, in order to allow the offeror to tender also those ones.

Finally, Richemont subscribed a lock-up clause for three years bounding itself not to sell a number of shares representing more than 25% of the resulting Yoox’s capital, not to buy more Yoox’s shares and not to enter into any shareholders’ agreement.

NAP has been valued around €1.5 bn and on Friday 27 March, before news of the potential deal came out, Yoox stood at €1.32 bn. After the transaction was announced, Yoox share price jumped to €25.75, up 22% from €21.08 at which the stock closed on March 27. On April 14, Yoox closed at €29.16 (+ 38%) with a total capitalization of €1.81 Bn.

Yoox price

Looking at the governance of the new combined company, Yoox’s founder, Federico Marchetti (currently owning 7% of Yoox), will be chief executive officer, while NAP founder, Natalie Massenet, will be chairman.

Yoox will remain listed in Milan and based in Italy.

Yoox was advised by Goldman Sachs; Richemont was advised by Lazard and Nomura. D’urso Gatti Bianchi and Skadden Arps Slate Meagher & Flom were Yoox’s legal advisors, while Bonelli Erede Pappalardo and Slaughter and May advised Richemont.

Industry overview

Oscar de la Renta (an American fashion house) has been the first to take the plunge and inaugurate its online transactional website. He expected merely smaller objects like belts and perfume to be sold. Nevertheless, “We could not have been more wrong in our expectations of the internet,” says Alex Bolen, the firm’s CEO.

This event is regarded as the starting point of a new “fashion era” when customers began to develop the so-called chic learn to click. Fashion houses have shifted from their being digital laggards to catching up at an extremely high pace with the e-commerce channel in the luxury goods sector.

Though reluctantly welcomed by some fashion cornerstones, online retail has recorded consistent growth over the past ten years. Thanks to a series of technological innovations multi-brand luxury shopping websites (YOOX Group and ASOS Plc Holdings in 2000, Zalando in 2008) began to emerge allowing luxury brands to increase their customer base through online platforms.

These websites manage to fully exploit economies of scope by delivering a one-stop selection of entirely different goods. At the same time, more and more fashion brands opt for this solution as an almost necessary step in their brand building process.

Nowadays online luxury spending still accounts for less than 5% of the $270 billion total luxury spending. Yet the latest trends towards an increase in the number of users submitting online orders together with an average higher annual expenditure per user point out a higher expected market capitalization of such websites in the future years. Furthermore, emerging markets now becoming big spenders on luxury has certainly played a pivotal role in this process.

These mail order retailers can also offer extremely tailored and customized communication to their users thanks to the great possibilities of globally social networking platforms such as Facebook.

Global luxury e-commerce is growing at a 30% yearly rate and it is even forecasted that by the end of the decade the industry will represent as large as one fifth of total yearly luxury revenue.

In particular, Yoox has always stood out in the sector thanks to the impressively sophisticated level of its logistics. This has made Yoox not to look like a mere outsourcer of extraneous brands, yet to be regarded as a real partner, getting a percentage of the sales as in a full-fledged commercial partnership. As Yoox’s CEO Federico Marchetti said: “We provide the car, but for us the best thing is if we have a great driver. And the driver is the brand.”

To contact the authors:

Costantino Brizzi               

Fabrizio Colloca                 

Hugues Coruzzi                  

Isabella Diplotti                 

Michał Ozimski                  

in collaboration with Giulio Palazzo