Farfetch rescued in last-minute deal by South Korea's Coupang

Farfetch has been rescued in a last-minute deal by South Korean retail giant Coupang. The move sees $500 million of emergency cash injected into the luxury marketplace and results in its removal from the New York Stock Exchange.

It was reported that restructuring specialist AlixPartners had been waiting in the wings to execute a potential administration process for Farfetch should the rescue deal not be secured.

The deal with Coupang should be finalised early in the new year. Farfetch founder José Neves, who owned 15% of Farfetch shares but controlled 77% of its voting rights, is said to have secured the backing of Coupang himself.

In a statement Neves said: “Coupang’s proven track record and deep experience in revolutionising commerce will enable us to deliver exceptional service for our brand and boutique partners, as well as for our millions of customers around the world.

“We are thrilled to be partnering with such a respected Fortune 200 company that is committed to investing in innovations that transform all aspects of the customer experience with Farfetch."

Bom Kim, founder and CEO of Coupang, added: “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. Farfetch 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.”

All previous Farfetch investors, including luxury conglomerate Richemont, China's Alibaba and Neves himself, will be wiped out as a result of the deal but Neves will be remaining with the company. Directors Dana Evan, David Rosenblatt, Diane Irvine, Gillian Tans, Stephanie Horton and Victor Luís, however, will be standing down, which Farfetch said was not a result of any disagreement and they left with the company's "sincere thanks".

Richemont and Alibaba were said not to be interested in rescuing the company themselves and investor Apollo, who had shown an interest, had also walked away.

A previously agreed deal between Farfetch and Alabbar to acquire a majority stake in Yoox Net-A-Porter from Richemont has now been terminated. As part of the deal Net-A-Porter had been expected to transition onto the Farfetch technology platform.

It is not yet clear what will happen to Farfetch's non-core assets, such as brand house New Guards Group and luxury fashion boutique Browns.

Browns was acquired by Farfetch in 2015 and has been used as a testbed for Farfetch's Store of the Future technology, which bridges the gap between the online and offline retail experience. Before the rescue deal had been struck, it was reported that Neves was looking to offload Browns with the UK's Frasers Group cited as the most likely buyer.

This morning it was reported that Frasers, which owns the Flannels chain of luxury boutiques, was in advanced talks to acquire Browns rival Matches from private equity house Apax Partners.

The struggles of Farfetch and Matches are indicative of the softening of the global luxury fashion market, which has been affecting many major players.

But Farfetch has made some strategic missteps, including the purchase of New Guards Group, which owns labels such as Off-White and Palm Angels. Farfetch purchased the group for $675 million in 2019 much to the chagrin of investors who objected to the group straying from its inventory light, marketplace model into the ownership and development of fashion brands.

Its new owner is a household name in South Korea and is a Fortune 200 company listed on the New York Stock Exchange. One of the largest retailers in the world, Coupang offers a variety of services, including same-day and dawn delivery of merchandise, delivery of prepared foods through Coupang Eats, fintech through Coupang Pay, and video streaming through Coupang Play. It is headquartered in the US with support services in South Korea, Taiwan, Singapore, China, and India.