Is the Richemont-owned Net-a-Porter Group for sale?

Is the Richemont-owned Net-a-Porter Group for sale?

European analysts weigh in on IPO plan rumours

Editor: Buro 24/7

Reports of brewing IPO plans for the Net-a-Porter Group by parent Compagnie Financière Richemont have surfaced over the passed week, leading to European analysts offering up their thoughts today...

The Richemont group declined to comment on the rumour that it is considering an initial public offering (IPO) of the luxury eCommerce giant, which was founded by Natalie Massenet (pictured above) in 2000.

After buying the Net-a-Porter group in full in April 2010, the firm's chief financial officer Gary Saage has insisted earlier this month that Net-a-Porter – much like the other luxury companies in Richemont's impressive portfolio – is definitely not for sale. 

European analysts have since weighed in on the reports of a looming LPO, with Swiss bank Vontobel publishing in a recent report that it favours a spin-off, rather than the alleged initial public offering for the luxury e-tailer. 

"After the IPO of Zalando this year there were already rumors about a possible IPO of Net-a-Porter," the report stated.

"In 2013 Richemont stated that the company is not up for sale and we would favor a spin-off instead of an IPO as Richemont already has a huge net cash position," Ventobel continued, indicating the luxury group's 4.3 billion euros, or $5.33 billion, in cash reserves, which is equal to 12 percent of its market capitalisation. 

Ventobel and other banks have estimated that Net-a-Porter is value at 1.2 billion euros to 1.5 billion euros, owing to estimates that it is worth two-times the ratio of enterprise value to sales. This equates to 3-4 percent of Richemont's market capitalisation.

Luca Solca, managing director at Exane BNP Paribas also weighed in on the IPO gossip, saying that cynically speaking the renewed rumours are motivated purely by money. "It comes from a move by Net-a-Porter's senior management to put pressure on Richemont, and enhance their variable compensation prospects," he said.

"In fact, senior management of different divisions at Richemont receives a very significant amount of compensation as variable compensation, based on value creation. It is obviously in Net's senior management's interest to get Richemont to attach as high a valuation on Net as possible," the Exane BNP Paribas MD added.

In his note, Solca also stated that Net-a-Porter has a "first-mover advantage, but the luxury industry is waking up to the online opportunity and the space is bound to get crowded."
Solca believes that as almost all luxury brands and stores are now online, and when you also consider the major 'online malls' like Amazon and Alibaba now have luxury edits, Net-a-Porter's "first-mover advantage" will start to dilute.

"It will be difficult to increase profit margin significantly, despite larger scale. Hence, unlocking the value of Net in the short term – through an IPO or otherwise – may not be a bad idea at all," Solca wrote. 

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