GENEVA, Switzerland — Nearly three years after Richemont SA merged Net-a-Porter with Italian rival Yoox SpA, the Swiss luxury conglomerate is doubling down on its commitment to the fashion e-commerce leader. Richemont, already the Yoox Net-a-Porter Group’s largest shareholder, has made a public tender offer to buy the shares in YNAP that it doesn't already own, equivalent to about 50 percent of the company, for €38 per share, an almost 26 percent premium over YNAP's closing price on the Milan Bourse on Friday of €30.26 per share. The total scale of the investment for Richemont would be about €2.7 billion, valuing the overall YNAP business at about €5 billion.
YNAP’s chief executive Federico Marchetti said he was receptive to the bid and YNAP has waived a clause in its shareholder documents, which would have prevented Richemont and all its affiliates from purchasing any more shares in the company. Richemont said it plans to continue to operate YNAP as a separate company.
"We are very pleased with the results achieved by Yoox Net-a-Porter Group's management team, led by Mr Federico Marchetti, and we intend to support them going forward to execute their strategy and further accelerate the growth of the business," said Johann Rupert, chairman of Richemont. "Thanks to our long-term commitment and resources, we see a meaningful opportunity to strengthen further Yoox Net-a-Porter Group's leading positioning in luxury e-commerce, growing the business in existing and new geographies, increasing product availability and range, and continuing to develop unparalleled services and content for today's highly discerning consumers."
"Richemont explained that the rationale for the investment is to build on YNAP’s solid track record of growth," said Marchetti. "Richemont aims to provide additional resources that further strengthen and accelerate YNAP’s long-term leadership in online luxury. This means investing even more in product, technology, logistics, people and marketing."
“I think it is good for YNAP shareholders. 25 percent on an already rich valuation is great. Less so for Richemont, as I think obtaining an attractive ROIC (return on invested capital) from this investment will be tough, unless one envisages further M&A,” said Luca Solca, head of luxury goods at BNP Exane Paribas.
“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,” added Mario Ortelli, senior research analyst of luxury goods at Stanford C. Bernstein, in a note to investors.
The bid comes at an important juncture for YNAP, as competitors across all three parts of its business — in-season, off price and e-commerce solutions for brands — are growing their market share. In its preliminary 2017 results, the company revealed it had surpassed €2 billion in net revenues, up nearly 12 percent year-over-year, and that more than 50 percent of its sales in the year came from mobile devices for the first time. The company's full results will be released in March.
Meanwhile, though hard luxury sales may be returning to growth, Richemont has struggled with a hard luxury downturn which pushed sales in the year ending March 2017 down 4 percent to €10.7 billion. What's more, its failure to forcefully embrace e-commerce has been widely noted. The YNAP bid seems to indicate a strategic shift. "With this new 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 Rupert.
The news is the latest twist in a long history between YNAP and Richemont: the group was an early investor in the Net-a-Porter business, taking a minority stake in 2002. In 2010, the conglomerate acquired a majority of Net-a-Porter from a group of private shareholders in a transaction that valued the business at £350 million. Then in 2015, Richemont entered into an agreement with Italy's Yoox Group to merge the company with Net-a-Porter in all-share deal in which Yoox bought Net-a-Porter from Richemont, forming the world’s largest fashion e-tailer. The transaction valued the combined entity at about 3 billion euros and promised to not only deliver economies of scale, but unite two highly complementary companies. The 2015 deal gave Richemont 48.9 percent of YNAP, but only a 25 percent voting stake and left the Italian company’s management in charge.
Now, Richemont is looking to own the entirety of the business.