Farfetch reported to be close to a rescue deal

Farfetch may announce a rescue deal as soon as today, according to reports over the weekend.

The global online luxury marketplace was said to be in advanced talks with a potential buyer in a deal that would secure it $500 million of emergency funding and see it delist from the New York Stock Exchange.

According to The Sunday Times, the potential purchase is private equity backed but beyond that its identity was unclear – investor Apollo was said to have been interested but has since stood back from the process. London-founded Farfetch is said to need to secure a deal before Christmas to avoid administration with restructuring business AlixPartners poised to take over should not deal be finalised.

It was revealed last month that Farfetch founder José Neves was seeking a deal to take the business back into private hands after a poor showing on the New York Stock Market. The business has lost 90% of its value, since its IPO in 2018 when it was valued at $6.3bn, and has been plotting the rescue with bankers, as well as shareholders.

The value of Farfetch peaked during the pandemic at $23 billion in 2021 but it has since been exposed to the slowdown in the global luxury market plus what appears to have been a strategic misstep in the purchase of a luxury brand group New Guards, which owns tables such as Off-White and Palm Angels. Investors disapproved of the move since it diverted Farfetch from the inventory light model, which they had backed.

It is understood that Neves himself has sourced the white knight investor and is believed to be planning to stay with the business should the deal go through. The entrepreneur owns 15% of the company's shares but due to the structure of the shareholding, he holds 77% of the voting rights.

In 2020, Farfetch executed a deal with Chinese retail giant Alibaba and luxury conglomerate Richemont in which both businesses invested $300m in the main Farfetch business, plus $250m each in its Chinese business.

Recently Farfetch received regulatory approval to acquire a 47.5% stake in rival group Yoox Net-A-Porter (YNAP) in exchange for the issuance of Farfetch Class A ordinary shares to its parent, which is also Richemont. The deal was first revealed last August and also involved Symphony Global, one of the investment vehicles of Mohamed Alabbar, taking 3.2% stake.

Once the deal is finalised, YNAP plans to adopt Farfetch's technology, to support its shift towards a hybrid retail-marketplace model.

As part of the rescue deal Neves is said to be planning to offload luxury boutique Browns, which Farfetch acquired in 2015. Retail group Frasers is said to be favourite to pick up Browns, should it come on the market, however this morning Frasers has been linked to a potential purchase of Browns rival Matches.