By Astrid Wendlandt
PARIS (Reuters) - Shares in Italian online fashion retailer Yoox continued their ascent on Wednesday, gaining more than 30 percent in three days as investors backed its deal to take over UK rival Net-a-Porter (NAP) in an all-share deal.
Attracted by the growth potential of the online luxury goods market, several shareholders said the deal would create value as the pair combined would be the industry leader with more than 2 million customers, 1.3 billion euros (947.7 million pounds) in sales and a lower cost base than before.
Several major luxury brands have been reluctant to embrace the Internet, partly out of concerns regarding the defence of their products' authenticity and worries that customers would not enjoy the same luxury service online as in their stores.
This week Chanel became the latest luxury brand to invest significantly in e-commerce, saying it would start selling its wares online as of next year. Many rivals such as LVMH's Louis Vuitton, the world's biggest luxury brand, and Prada, have been notably slow to jump on the internet bandwagon.
Yoox's shares closed up nearly 10 percent at 287.19 euros on Wednesday after gaining 11 percent on Tuesday, when it unveiled the transaction, and rising 10 percent on Monday when it confirmed Reuters reports it was in merger talks with Net-a-Porter.
As a result the group's market value has risen by more than 300 million euros to 1.64 billion euros since Friday's close.
"We believe people continue to underestimate the penetration rate of online luxury and hence the revenue generation capacity of this new group," said Argonaut Capital Partners, one of Yoox's institutional investors.
Argonaut said it had bought more Yoox shares, seeing scope for "meaningful upside earnings potential."
Most luxury online retailers enjoy annual sales growth of between 15 and 20 percent while the overall brick-and-mortar luxury goods industry average is around 5 to 6 percent, down from over 10 percent four years ago as major engines of growth such as China slowed.
"Having partners like Yoox or NAP is a way for them (luxury brands) to build a reliable, quality internet presence at a good cost and in a short period of time," said Candriam Investors Group, another Yoox shareholder backing the deal.
Many luxury brands are adopting a multi-channel approach. The Internet may not be where most customers buy their luxury goods but it is the go-to place to get information about new products and events.
It has been crucial in making Asia, particularly Chinese customers fashion-savvy very fast, leading to swift changes in preferences and tastes that some big luxury brands such as Prada and Kering (PARIS:PRTP)'s Gucci have been struggling to respond to quickly.
Renzo Rosso, the entrepreneur behind the jeans brand Diesel and the top individual Yoox shareholder with an 8.61 percent stake, bigger than that of Yoox's founder and chief executive, Federico Marchetti, was enthusiastic about the deal.
"I congratulate my business partner and friend Federico Marchetti as well as Nathalie Massanet (NAP's founder) for this tie-up that creates the biggest and coolest online luxury fashion group in the world," he said.