* Yoox makes all-share offer to buy Net-a-Porter
* Richemont will own 50 pct of combined unit
* Yoox shares up 11 pct after 10 pct rise on Monday (Adds details of deal, updates share prices)
By Astrid Wendlandt and Valentina Za
PARIS/MILAN, March 31 (Reuters) - Italian online fashion retailer Yoox has agreed to buy Net-a-Porter, its upmarket rival, in an all-share deal that creates an industry leader in the booming online luxury market, with combined sales of 1.3 billion euros ($1.4 billion).
Net-a-Porter’s (NAP) owner Richemont will receive 50 percent of the combined Yoox Net-a-Porter Group but its voting rights will be capped at 25 percent. Yoox management will effectively be in charge of the combined business and Richemont will take a back seat.
“Today, we open the doors to the world’s biggest luxury fashion store,” said NAP founder Natalie Massenet, who will oversee editorial content of the group as executive chairman.
Yoox boss, founder and minority shareholder Federico Marchetti will become chief executive and shape strategy. “Between us, we have changed the fashion industry somehow and we will continue to change it,” he told reporters in a conference call on Tuesday.
Under the terms of the deal, NAP will be absorbed into Yoox and the combined entity will remain incorporated and listed in Italy.
The online luxury goods industry is still in its infancy, making up only around 5 percent of total luxury sales because many brands put off Internet expansion, worrying it would not offer customers the same high-end experience as their stores.
But many executives now believe the Internet has redrawn battle lines between luxury brands and will be vital in driving future sales, particularly among the so-called Millennials, web-savvy customers born between 1980 and 2000.
Online luxury is not yet very profitable: both Yoox’s and NAP’s operating margin is less than 5 percent compared with more than 25 percent for most big luxury brands. But the pair hope their bigger size will help to cut warehouse, logistical, back-office, advertising and distribution costs.
Yoox operates the online sales of fashion brands such as Ermenegildo Zegna and Kering’s Bottega Veneta and Saint Laurent. It also sells items at a discount.
Analysts said the deal could help to boost Yoox’s chances of retaining luxury brands that might otherwise have wanted to take their online operations in-house once they gained experience.
“I’m positive on the outlook for the online luxury market. I believe it’s a structural change that will gain traction as younger generations of more ‘digitally minded’ managers get to the top,” said Gian Luca Pacini at Intesa Sanpaolo in Milan.
NAP specialises in current season and off-the-runway items, and advises customers on what to wear them with. It also publishes the “shoppable” fashion magazine Porter online and in print with a circulation of 152,500.
NAP had adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 58.3 million euros on revenue of 753.8 million in 2014, according to slides presenting the deal, while Yoox made EBITDA of 50.1 million euros on sales of 524.3 million. NAP has an average order value of 481 euros while Yoox’s is 202 euros.
Marchetti said the two companies were complimentary also from a geographical standpoint as NAP had a greater presence in Britain, the Middle East and Australia while Yoox was stronger in Japan and China.
The United States would remain the two companies’ No.1 market, followed by Britain, Italy and the rest of Europe.
Marchetti said NAP would have the same valuation as Yoox once the deal was completed in September. Analysts valued NAP at around 1.5 billion euros, above Yoox which stood at 1.32 billion euros on Friday before news of a possible deal came out.
Yoox shares - which had risen nearly 10 percent on Monday after Yoox and Richemont confirmed Reuters reports they were in talks - closed up 11.1 percent at 25.75 euros on Tuesday, valuing the company at 1.6 billion euros. Richemont shares closed down 2.1 percent.
The combined business will generate annual synergies of around 60 million euros by the third full year, the two companies said.
If Yoox shareholders approve the deal in June, the new group will launch a rights issue of around 200 million euros in the autumn to fund growth, with Richemont expected to fund around half the sum, a spokesman for the Swiss group said.
Marchetti said strategic investors keen to participate in the capital increase could include luxury brands but gave no further details.
Richemont, which makes the bulk of its profit from its Cartier watch and jewellery brand, has agreed to a three-year lock-up for half its stake, or 25 percent, which analysts expect the Swiss group to sell eventually. It will appoint two of the 12-member board.
Marchetti said Richemont was handing over NAP to Yoox debt-free, implying that it would take on its own books NAP’s debt of 30 million euros.
$1 = 0.9274 euros Additional reporting by Katarina Bart in Zurich; Editing by Sophie Walker and David Stamp