Wednesday, 7 April 2010

richemont's acquisition of net-a-porter.com

the batteries are recharged, his vision somewhat clearer, the sun is shining, it's like everything has happened but nothing actually has. during my 3 week hiatus, the biggest and possibly most interesting piece of news (for me) that occurred, was the acquisition of online retailer net-a-porter.com by swiss conglomerate richemont SA.


natalie massenet, founder and chairman of online fashion retailer net-a-porter.com / reuters pictures

richemont acquired over 80% of the share capital of net-a-porter.com (richemont previously owned a 33% stake in the company), valuing the online retailer at £350mil. net-a-porter founder, natalie massenet, will gain some £50mil from the sale of her shares.

without getting too lengthy, i find this deal particularly interesting:

  • portfolio diversification
richemont group houses a stellar list of jewellers and watch makers, such as cartier, van cleef & arpels, piaget, jaeger lecoultre etc. luxury fashion formed a small subset of their business (chloe, dunhill etc). adding net-a-porter.com will greatly balance the mix. the jewellery and watches business suffered in the current climate: less bankers bonus, less watches, less trophy wives, less jewellery.


results for the 9 months ended 31 dec 2009 for richemont showed decreasing sales in all categories, with turnover dropping 9% as compared to the previous year. i think net-a-porter will be a great fit and diversification within richemont. there's a lot of potential: net-a-porter could expand it's offerings to include menswear, childrenswear etc.

  • 1st april 2010 acquisition
it could be the amateur in me, but acquisition date of 1st april meant that the results of net-a-porter would not be included within richemont's financials year ended 31st march 2010, but disclosed within the notes as a material event. too much hassle to do so, or let the rather disappointing year ended 31st march 2010 be a complete write-off and start afresh in 2011?

  • lvmh
lvmh shuttered eluxury.com last year, so it is interesting to see richemont's optimism in luxury online retailing. net-a-porter.com could be a fantastic outlet for lvmh's fashion houses. smaller labels like celine, berluti, kenzo etc could benefit from it. lvmh is shopping in this climate, they bought edun, an eco label set up by ali hewson, wife of U2's bono. so it puzzles me why there wasn't a deal. or maybe there was but laymen like us weren't aware.

  • prada
there were lots of rumours previously about richemont possibly taking a stake in debt ridden prada. as at 31st dec 2009, richemont was sitting on €1.3billion of cash. analysts questioned why the huge amount of cash lying around, and if the cash were to be returned to investors as dividends. we are going to see more mergers and acquisitions in this climate, i think net-a-porter is the first of perhaps a few more acquisitions coming. prada or net-a-porter will be a favourable mix to their stable, and if indeed richemont were previously in talks about a possible stake in prada, but chose net-a-porter instead, it really spells a lot about prada's finances and future.

is prada's ipo ever going to materialise?


share price of richemont SA from nov 2001 to apr 2010 / richemont.com

so how did the market react to richemont's acquisition of net-a-porter.com? very favourable. in this "are we in a recession or not" economy, richemont's share price is at it's very peak, closing at CHF42.21 on 6th april 2010. the amateur in me thinks richemont will be a good investment for the long run, but seeing potential is one thing, buying shares at it's peak is quite another.

so a little food for thought. and happy easter.



p/s: thank you for the lovely emails and comments whilst i was away. i really appreciate it all.




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9 comments:

  1. Whenever you do these financial analysts you just blow me away!! I think that is something unique to you over here. Though it does make me nervous when people sell off a majority stake in their company. I know n-a-p is shop, but I always reminded of what happened with saint laurent, valentino, and the likes when they gave up control of their companies.

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  2. arghhh!! ur back!!! *screams like a high school girl*


    another insightful blog! :)

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  3. It's so good to have you back- you were missed. Glad to hear you enjoyed your holidays...
    All the best,
    C.

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  4. I hope buying stocks is not as scary as it sounds. It seems like an exciting thing to do but my technical non-know-how (?) stops me.

    WB!

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  5. i love this post. much better than the ft!

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  6. Excellent story. Thanks for the analysis. Why is Prada so broke?

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  7. LO: i would like to know too. prada's privately owned so their financial numbers aren't readily available to the public. it was last reported that they have debts to the tune of $1.7bn (http://00o00.blogspot.com/2010/01/lanvins-new-investor-revealed-prada.html)

    looking back at that post, i suggested that richemont would be making acquisitions, and they did!

    i think prada's debts had something to do with the acquisition of helmut lang and jil sander at the height of the market boom, and the failure of miu miu menswear line. helmut lang was later sold to Theory group, i suspect at a loss. jil sander later sold to current owner, again i think at a loss.

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  8. Thanks for the sharing this website. it is very useful professional knowledge. Great idea you know about company background.
    web application development

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what's he wearing?