Not too many years ago buying a Gucci bag or a Valentino dress on the Internet without feel or fit them was science fiction. The dream soon became true thanks to Yoox and Net a Porter, the former created in 2000 by Federico Marchetti in Italy and the latter by Natalie Massenet in UK in the same year. The two companies have been tackle the Internet challenge from the very beginning, in a time where very few had a serious long term strategic vision on the e-commerce. Theirs is to offer people the exclusivity of luxury goods along with the accessibility of the web. On that common goal, merger talks between the two companies began developing naturally.
THE MERGER
On the 31 March 2015 Yoox and Richemont communicated to the market that they had signed a deal where Yoox, whose name is created with Internet and male/female DNA, has taken over Net a Porter, which was under control of Richemont through Largenta Limited (under English law).
Briefly, the share ownership scheme was:
Richemont held 100% of the shares of Largenta Limited, which held, in turn, 100% of NAP.
To make the operation possible, the key was to create a vehicle society, Largenta Italia, to integrate the two different jurisdictions. This complicated operation was finalised to allow the aggregation of two similar and complementary societies with a very high synergy power.
So the scheme becomes:
Richemont, Largenta Italia, Largenta Uk, NAP.
Richemont gave Largenta Italia to Yoox, because NAP was under control of Largenta Italia.
The merger have been effective on the 5th of October 2015. The issuer (Yoox) increased its social capital by 655.995,97 € by issuing 65.599.597 new shares to Richemont, of which 20.693.964 ordinary shares and 44.905.633 shares without voting right (the so-called “B shares”).
Thus, at the end of this operation, Richemont had 24,28% of ordinary shares and the 50,41% of the total capital (ordinary and without voting shares). The transfer remuneration of 1840725 thousand of euro is calculated by the fair value of the new shares on 5th October 2015 per number of issued shares.
It is important to say that on March 2015, Richemont and Federico Marchetti signed another deal, a lock-up clause, where Marchetti would become the CEO of YNAP for at least 3 years from the 5th of October 2015, the effective date of the operation. Furthermore, the Shareholders’ Agreement included a standstill clause where Richemont and its affiliates, for a period of three years from the day of the operation, cannot purchase YNAP shares or other YNAP financial instruments without prior written consent of YNAP.
THE RICHEMONT’S VOLUNTARY PUBLIC TENDER OFFER
A month ago, on January 22 of 2018, Compagnie Financière Richemont SA (Richemont), the Swiss luxury goods group, announced its intention to launch a voluntary public tender offer to acquire all the issued and the planned to be issued ordinary shares of YOOX NET-A-PORTER GROUP S.p.A (“YNAP”) that it or its affiliates do not already own. For each ordinary YNAP share held, YNAP shareholders would receive 38.00€ per share, with a capital gain of 25,6% with respect to Friday the 19th, when the price of shares closed at 30,26 € and a premium of 27% on the weighted average price of the last three months. And what about the standstill clause we have mentioned? The issuer (YNAP) has granted its consent to the Offeror’s acquisition of the ordinary shares of the Issuer and in order to do it, the Shareholders’ Agreement has been modified.
Here is a closer look on how the market reacted.
Source: Bloomberg
From this graph from Bloomberg, where we have the market price of YNAP from January second until nowadays, it is easier understand the dynamics of the operation. We can notice that until January 22nd the market price ranged from euro 29 to 31, but it’s quite clear that from the announce date the YNAP share price reached a peak to 37,88 €, stabilized until today.
The operation will cost to Richemont 2,7 € billions and the aim is to exceed the 90% of capital shares to obtain the delisting of the Issuer’s ordinary shares from the Stock Exchange Market managed by Borsa Italiana S.p.A.. Marchetti has already given up to its 5,7% of shares, but Richemont confirmed him as the Ceo of the group, praising his management and leaving the headquarter in Italy.
Why Richemont chose to buy this group? As Marchetti said, in 2009 during Yoox’s IPO, the total revenues were around 150 € million but the Anglo-Italian collaboration brought total revenues to around 200 € billion in a couple of years.
Since 2002 Richemont supported Net a Porter, being a minority investor first with a 25% stake and then a controlling shareholder in 2010. Later in 2015 Richemont became the major investor in YNAP Group and since then Richemont showed to really believe in the e-commerce of the luxury goods. YNAP is the first online retailer of luxury goods and Compagnie Financière Richemont wants to address its financial resources to enhance YNAP’s leadership through investments in product and technology. Although the strength of this group, YNAP has to be aware of its competitors like Amazon and Alibaba, colossuses of the e-commerce business. There are rumours about the hypothesis that Richemont’s acquisition is indeed aiming to sell YNAP to Amazon or Alibaba. The company could in fact benefit from the acquisition of YNAP, without even struggle to build an e-commerce business of luxury goods from zero.
What do you think is going to happen in the future?
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