Richemont to pay up to $3.29 billion for full control of Yoox.com's operator

By Matthew Dalton

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 23, 2018).

One of the luxury industry's biggest players, Compagnie Financière Richemont SA, is taking control of Yoox Net-a-Porter SpA, one of the fashion world's most disruptive e-commerce companies.

Richemont said Monday it will spend up to EUR2.69 billion ($3.3 billion) to buy the shares in Yoox Net-a-Porter it doesn't already own. The deal isn't huge for the Swiss conglomerate, which owns Cartier and many other luxury brands, but it is a measure of how the shift from brick-and-mortar to online retailing is spreading to even the most expensive and exclusive consumer purchases.

Yoox Net-a-Porter, or YNAP, has become a major online marketplace for the luxury industry in recent years. While major fashion labels have been slow to establish their own internet retailing operations, YNAP has filled the vacuum.

The company, based in London and Milan, operates its own websites, such as Yoox.com and Mrporter.com, in addition to designing websites for luxury brands to sell their wares. It also runs an extensive logistics operation designed to deliver goods to the industry's well-heeled customers within days.

The challenge of reaching affluent clientele in the internet age is particularly acute in the watch sector, one of Richemont's main businesses. The company, whose brands include Vacheron Constantin, Piaget and Baume & Mercier, has suffered as younger consumers increasingly shop online.

"With this step, we intend to strengthen Richemont's presence and focus on the digital channel, which is becoming critically important in meeting luxury consumers' needs," said Richemont Chairman Johann Rupert.

Richemont's offer is worth EUR38 a share, a 25.6% premium to YNAP's closing price on Friday, and the stock rose 24% on Monday. Richemont already owns 24.97% of YNAP's ordinary shares. It also owns nonvoting shares that give Richemont nearly 50% of the e-commerce firm's overall equity.

Revenue at YNAP has surged since the company was created from the 2015 merger of Italian e-commerce operator Yoox and London-based Net-a-Porter, which was controlled by Richemont. Revenue in 2017 was EUR2.1 billion, up 15% on the year at constant exchange rates.

Federico Marchetti, YNAP's chief executive, voiced support for Richemont's offer, and the e-commerce company waved a 25% limit on the portion of its voting shares that Richemont is allowed to hold.

As traditional retailers struggle, the luxury industry is intensifying its efforts to find new retail outlets. Brands are cutting deals with Chinese e-commerce giants Alibaba Group Holding Ltd. and JD.com to distribute their wares. Luxury conglomerate LVMH Möet Hennessy Louis Vuitton has started its own e-commerce site.

A few companies, such as Swatch Group, have held talks with internet behemoth Amazon.com Inc. But concerns about counterfeits and compromising brand exclusivity have stopped the luxury industry from cooperating extensively with Amazon, which made its mark with mass-market goods.

Richemont's move is likely to raise questions among other luxury brands that have come to rely on YNAP for their e-commerce operations. The company's customers include Armani, Valentino and most of the brands owned by luxury conglomerate Kering SA, including Saint Laurent, Bottega Veneta and Balenciaga.

Richemont said YNAP will continue to operate as a separate business to ensure fair treatment for brands not owned by the Swiss company.

"Given the lack of interesting acquisition targets up for sale in their core business of hard luxury, Richemont has decided to put at work its big cash pile investing into distribution channels," said Mario Ortelli, an analyst at Bernstein in London.

Write to Matthew Dalton at Matthew.Dalton@wsj.com

(END) Dow Jones Newswires

January 23, 2018 02:47 ET (07:47 GMT)

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