One of the luxury industry's biggest firms, Compagnie Financière Richemont SA, is gobbling up Yoox Net-a-Porter SA, one of the fashion world's most disruptive e-commerce companies.
The deal -- for Richemont to spend up to EUR2.69 billion ($3.3 billion) buying the shares in e-commerce firm Yoox Net-a-Porter, or YNAP, that it doesn't already own -- isn't large for the Swiss luxury conglomerate that owns Cartier and many other luxury brands. But it's a measure of how the shift from brick-and-mortar to online retailing is spreading to even the most expensive and exclusive purchases.
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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 London-based company 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 bring goods within days to the doors of the industry's well-heeled customers.
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, which owns brands such as Vacheron Constantin and Piaget and Baume & Mercier, has suffered as traditional watch retailers falter. 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 for YNAP is worth EUR38 a share, a 25.6% premium to Friday's closing price. YNAP's shares opened up more than 20% on Monday. Richemont already owns 24.97% of YNAP's ordinary shares. It also owns a large block of nonvoting shares, giving it nearly 50% of YNAP's overall equity.
Revenue at YNAP has surged since the company was created from the 2015 merger of Italian e-commerce firm Yoox and London-based Net-a-Porter, which was controlled by Richemont. Revenue topped EUR1 billion in the first half of last year, up 20%.
The problems facing traditional retail stores have intensified efforts by the luxury industry to find new ways of reaching customers. 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 website.
A few companies, such as Swatch Group, have held talks with Amazon.com Inc., the internet behemoth better known for mass-market goods. But concerns about counterfeits and diminishing their brands' exclusivity have stopped the industry from cooperating extensively with Amazon.
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 runs the websites and e-commerce logistics for an array of companies, such as Armani, Valentino and most of the brands owned by luxury conglomerate Kering SA -- 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 22, 2018 07:13 ET (12:13 GMT)
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