Korean Retail Giant Coupang to Acquire Ailing Farfetch in $500M Deal

Following repeated blows to its share price and reports of privatization, Farfetch has reached an emergency deal that will see its assets acquired by Coupang, Inc. In a statement on Monday, the Seoul-founded, Seattle-headquartered retail giant confirmed that it will take NYSE-listed Farfetch private, combining its “operational excellence and innovative logistics” with Farfetch’s “leading role in the luxury ecosystem” to deliver “exceptional experiences for customers, boutiques, and brands across the world.” The deal will “give Farfetch access to $500 million of capital to continue providing exclusive brands and boutiques with bespoke, cutting-edge technology and giving leading designers access to consumers around the globe,” according to the parties’ release, which notes that Farfetch chairman and CEO, José Neves, will remain at the company he founded. 

Coupang – together with Greenoaks Capital Partners – swooped in as Farfetch was reportedly seeking out a “rescue”white knight” to enable it to avoid bankruptcy. The deal comes after Yoox-Net-a-Porter (“YNAP”)-owner Richemont revealed in a statement last month that it did “not envisage lending or investing into Farfetch,” while reminding shareholders that it “has no financial obligations towards Farfetch.” Similarly, other big-name Farfetch shareholders, including Chinese e-commerce group Alibaba and Artemis, the investment company of Kering’s Pinault family, did not seem willing to come to the rescue either. 

Meanwhile, fashion-tech investor Carmen Busquets was said to be “looking to raise $500 million to $1 billion” to help resuscitate Farfetch. (Busquets, who maintains active stakes in Business of Fashion and former Farfetch stakeholder Felix Capital, among others, first invested in Farfetch in 2015 and lists her investment in the company as ending in 2018.) And still yet, there were reports last week that Apollo Global Management might provide emergency funding to Farfetch to enable the ailing retailer to “shore up its finances.”

Not the only Farfetch news to come on Monday morning, Richemont announced that as a result of the “contemplated transaction” between Coupang and Farfetch, its own deal with Farfetch is now off the table. “Richemont, Farfetch, and Symphony Global, one of the investment vehicles of Mohamed Alabbar, have terminated the agreements for (i) the sale of a majority stake in YNAP to Farfetch and Symphony Global; (ii) the adoption of Farfetch Platform Solutions by most Richemont Maisons and YNAP; and (iii) the opening of e-concessions on the Farfetch marketplace by several Richemont Maisons.” 

In furtherance of that headline-making transaction, Richemont was set to sell off a 47.5 percent “non-controlling” stake in YNAP Farfetch in exchange for a 10 to 11 percent stake in Farfetch and a 2.7 billion euro ($2.7 billion) write-down. (You can find a deep-dive into the deal right here.) Despite receiving final regulatory approval from the EU Commission in October, questions about the state of the much-anticipated tie-up came to a head in recent weeks, prompted in large part by Farfetch’s plummeting market value and Neves’ reported plans for privatization.

With Farfetch’s stock price falling by more than 80 percent over the past year, Richemont’s potential stake in Farfetch was whittled down from its former $615 million valuation to something closer to $120 million, UBS analyst Kunal Madhukar said in October. “Richemont would have to accept a significantly lower value for Yoox-Net-a-Porter or agree on new deal terms with Farfetch. Taking Farfetch private could facilitate a compromise on new terms,” Stifel’s Rogerio Fujimori told the FT around the same time. 

Following the announcement of the impending deal with Coupang, Richemont stated that “it is reasonable to expect that the $300 million convertible senior notes issued by Farfetch Limited to Richemont in November 2020″ – stemming from the mega-deal that first brought Farfetch and Richemont together – “will not be repaid.” Meanwhile, Farfetch shares has been suspended from trading, with the statement: “Farfetch Limited expects that holders of its Class A and B ordinary shares and its convertible notes will not recover any of their outstanding investments in Farfetch.”

The Fall of Farfetch 

The future of Farfetch has been a topic of enduring industry discussion, which seemed to reach a fever pitch last month after the company revealed on November 28 that it would not present its third quarter results, cancelled the corresponding conference call, and discounted all previously issued guidance, and prompted rumors of an effort to take the company private following its September 2018 New York Stock Exchange listing. The company’s shares have plunged 67 percent since it opted not to release Q3 results, and more recently, the price of its stock dropped even further to a mere 63 cents, giving the company a market capitalization of less than $250 million, a far cry from the $26 billion valuation that the company nabbed at the height of the pandemic in 2021. 

Shedding light on the current state of the company this past week, Moody’s pointed to the “significant deterioration in Farfetch’s share price over the past year or more, which … will have a detrimental effect on the company’s ability to access capital markets to support its liquidity,” and “soft demand [in the luxury clothing market more broadly] as consumers in various parts of the world have pared back on discretionary spending.” Moody’s said that these points were key drivers behind its decision to downgrade Farfetch deeper into the “junk” territory. 

Looking ahead, Coupang founder and CEO Bom Kim says, “Farfetch is a landmark of the luxury landscape and has been a transformative force in demonstrating that online luxury is the future of luxury retail.” He confirmed that the London-headquartered company “will rededicate itself to providing the most elevated experience for the world’s most exclusive brands, while pursuing steady and thoughtful growth as a private company. We also see tremendous opportunities to redefine the customer experience for luxury clients everywhere.”