March 27, 2015 / 5:10 PM / 5 years ago

Exclusive: Yoox and Net-a-Porter in merger talks again - sources

PARIS (Reuters) - Online fashion retailers Yoox and Richemont’s Net-a-Porter are trying to resuscitate merger talks that took place more than a year ago to better fight cut-throat competition, industry sources told Reuters.

UK-based Net-a-Porter, estimated to be worth between 1.3 billion and 1.5 billion euros ($1.42 billion to $1.64 billion), is one of Richemont’s fastest growing companies but it has yet to make a profit because of the significant investments it made in the business.

Italy’s Yoox, which is also enjoying double-digit growth, is profitable and carries a similar valuation to Net-a-Porter with a market capitalisation of 1.32 billion euros.

“It might work this time because Net-a-Porter is in better shape today than it was a year and a half ago and therefore it is more amenable to do deal today than back then,” one of the sources said. Richemont and Yoox declined to comment.

The sources said a combined Yoox and Net-a-Porter would be better suited to take on rising parcel delivery costs as well as intensifying competition from online rivals and upmarket department stores such as Bergdorf Goodman and Saks Fifth Avenue, which have invested significantly in online trading and content.

The talks come as Net-a-Porter founder Natalie Massenet is in the final stretch of negotiating her five-year payout deal with Richemont which could reach more than 100 million euros based on the value of her online company.

The sources with knowledge of the situation said Richemont could use the payout as an incentive to get Massenet to accept a deal with Yoox which she was reluctant to approve back in 2013.

“It is normal that these deals happen at a time when earn-outs are being negotiated,” one of the sources said.

There have also been reports that Richemont could be exploring an outright sale to U.S. online retailer Amazon.

Richemont, which makes the bulk of its profits from jewellers such as Cartier and Van Cleef & Arpels, acquired control of Net-a-Porter in 2010 in a deal that valued it at 392 million euros.

Net-a-Porter’s sales are forecast to have reached more than 700 million euros in the fiscal year ending this month while Yoox’s net revenue last year reached 524.3 million euros, up 17.7 percent at constant exchange rates.

Sources said that Richemont, which financially supports several struggling fashion brands such as Lancel and Dunhill, would be keen to offload Net-a-Porter as it is not regarded as core to the group and requires further investment.

They also said that Richemont would consider a deal involving Yoox shares rather than cash since the group had more than 4 billion euros of cash sitting on its balance sheet.

This would explain why Richemont would not be contemplating an initial public offering of Net-a-Porter, the sources added.

The sources said a merger with Yoox would also solve a management issue for Net-a-Porter as it has been without a chief executive since the departure of Mark Sebba last year.

They said Yoox Chief Executive Federico Marchetti, an industry veteran, could take the reins of the combined entity.

Additional reporting by Valentina Za; editing by Geert De Clercq and Jason Neely

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