Net-A-Porter merges with YOOX

A couple more stories about NET-A-PORTER, this time the Yoox story, the NYT is following that -> Yoox Group in Talks With Luxury Online Seller Net-a-Porter. As you can see, when Richemont purchased the business and valued the whole thing at 520 million Dollars in 2010, the company was not altogether sure where all of this was going.

To try and find revenues for NET-A-PORTER specifically, or profits is too difficult. The business is listed in the "other" segments of Richemont's businesses, listed alongside Shanghai Tang, Mont Blanc, Purdey and Peter Millar. Those businesses collectively make a loss, there is however turnover of nearly 1.5 billion Euros collectively last year (see the annual report). Under "clothing and other" (where Mont Blanc is excluded) at the half year stage this division had sales of 795 million Euros. That is relative to group sale sales in the first half of 5.430 billion Euros. So, we can presume that whilst this is relatively small (14.6 percent of revenues), it is growing quickly.

It is also the most exciting space right now, for investors looking for newer technologies and platforms. It trades on two and a half times sales, if this business is anywhere near that, I would say that either Richemont should, as the Mo Down (a luxury blog I subscribe to) suggests: Net-a-Porter to launch IPO? or fetch a high price.

Of course they, being Richemont, do not need the money. It is just interesting to see that other people are willing to pay more. And more for, let us face it, not the people that manufacture the goods, rather the lower margin platform. I suppose the conundrum for Gary Saage (the co group CFO), who is possibly the next driver of this business (as Bernard Fornas and Richard Lepeu retire) is whether or not it is their core business. It certainly fits and ticks all the boxes, let me leave you with the groups strategic objectives -> Strategy. Until something actually happens, it won't of course. We watch.

And guess what. This newsletter evolves with the market news. I had written all of this before the news arrived this morning at around 7:45 local time. Here is the official announcement from Richemont -> RICHEMONT SIGNS AGREEMENT TO MERGE THE NET-A-PORTER GROUP WITH YOOX GROUP. Under the deal, each side, Richemont and YOOX will own half of the combined entity. Richemont will only have 25 percent of the voting rights however. Here goes: "Richemont will receive, in aggregate, on a fully diluted basis 50 % of the share capital of the combined entity's listed parent company. In order to preserve the independence of YOOX Net-A-Porter Group, Richemont's voting rights will be limited to 25%. Richemont has committed to a lockup period of three years in respect of shares equivalent to 25% of the total share capital of the combined entity."

The upshot is that Yoox is up another 8 percent today, following a 12 percent gain yesterday. This is pretty small, by way of news for Richemont, they are down around 0.4 percent in Zurich, about the same here. Simple math, if Yoox doubles the number of shares in issue (as per above), Richemont's stake will be worth 1.6 billion Euros. Which is around 4 percent of the current Richemont market cap. Small and on a very demanding multiple. A nice to have.