‘Asian Amazon’ Coupang rescues Farfetch with $500 million deal

South Korean e-commerce giant Coupang Inc. will acquire British luxury marketplace Farfetch Holdings in a deal that will provide Farfetch with $500 million in emergency capital. Global investment firm Greenoaks Capital Partners that backs Kim Kardashian’s Skims, has also “brought substantial financial expertise to the transaction and is Coupang’s investment partner in this acquisition”.

“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,” said Bom Kim, chief executive of Coupang in a press statement.

JPMorgan Chase & Co will run a marketing process for all the assets of Farfetch.

Farfetch's earlier deal with Cartier-owner Richemont is off the table.

Richemont which owns luxury brands like Cartier, Swiss watch brands Piaget and IWC under its umbrella, had originally made a deal to offload an initial 47.5% stake in Yoox Net-a-Porter (YNAP) to Farfetch in 2022.

Once Coupang’s acquisition goes through, Farfetch will become a private company, removing its publicly traded shares—including those belonging to founder and CEO José Neves. Neves owns 15% of Farfetch and controls 77% of the voting rights. Other large investors besides Richemont include Alibaba, and Artemis, the family holding company of the billionaire Pinault family.

Currently, Farfetch is a listed company on the New York Stock Exchange. 

Weathering the financial dilemma

Farfetch’s race to secure fresh finance has been ongoing. Last week, Sky News reported that the struggling luxury marketplace was in talks with several parties, including American private equity firm Apollo Global Management, to bring $500 million in emergency funding.

The company that was floated in 2018 struggled to become profitable after its failure to rope in top luxury masons like Hermès and Chanel that famously dodge the discounting tactics of third party retailers and maintain a strict internal control.

Farfetch stock plunged by 38% in pre-market trading after the news broke out on December 18. The stock has already dipped 68% since November 28, when the company scrapped its earnings report amid speculation that Neves was negotiating to take the ailing company private. It’s now trading below $1 and its market value has shrunk to $254 million, down from its peak of $26 billion in February 2021. 

Stock chart dated December 19, 2023

Coupang, headquartered in Seoul and Seattle, often called the ‘Amazon of Asia’, was not anticipated to be Farfetch's rescuer. For the uninitiated, Coupang is the Softbank-backed dominant e-commerce player in South Korea’s rapidly growing e-commerce market, the company distinguishes itself through an emphasis on first-party products and a robust end-to-end logistics infrastructure. Coupang also has a payments unit and a restaurant delivery business.

In a press statement, Coupang said its “operational excellence and innovative logistics combined with Farfetch’s leading role in the luxury ecosystem will drive exceptional experiences for customers, boutiques, and brands across the world”.

Adding that it’s “uniquely positioned to unlock Farfetch’s tremendous value for the vast personal luxury goods segment in South Korea, which has the world’s highest per-capita spending on personal luxury goods.

Couture coup

The deal is a setback for Farfetch’s founder José Neves, who had sold the group to investors as a global destination and a growth story that combined tech expertise with luxury savvy to lure fans of brands like Dior, Celine, Gucci and Burberry.

If you dig below the surface, Coupang and Farfetch’s match seems logical.

Coupang is a Fortune 200 company based in South Korea and, since 2022, also in Seattle. It operates in South Korea (where it is the biggest online marketplace), Taiwan, China, Singapore and India—but its US business is still tiny. It has been trading on the New York Stock Exchange since March 2021. By buying Farfetch—which is based in the UK but traded on the New York Stock Exchange and caters to a large US customer base—Coupang can expand its footprint in the United States.

Coupang has not revealed the exact terms of the deal.