Coupang Finalizes Purchase of Farfetch
● Coupang confirmed it has completed its purchase of Farfetch, saying a fresh $500 million in capital should keep the company running smoothly.
LONDON — Coupang confirmed Wednesday that it completed the acquisition of Farfetch Holdings plc, igniting the ire of long-term bond holders who said they are exploring “possible litigation steps” as a result of the sale.
Coupang, which first announced the deal on Dec. 18, said that by providing access to $500 million in capital, Farfetch “will continue delivering exceptional services for its brand and boutique partners,” and to more than 4 million customers worldwide.
The e-commerce company added that by leveraging its operational know-how and logistics, “Farfetch is now well-positioned to pursue steady and thoughtful growth.”
Coupang also filed a 6-K form with the U.S. Securities and Exchange Commission, confirming its purchase of Farfetch, and reiterating the terms of the deal.
It said Farfetch expects holders of Class A and B ordinary shares and convertible notes “will not recover any of their outstanding investments in Farfetch, and Farfetch expects to be liquidated.”
As reported, Coupang purchased Farfetch as part of a “pre-pack,” or planned, administration process. The London-based Farfetch had long struggled to turn a profit and was running out of cash as interest rates rose and tech valuations began to plummet.
As a result of the sale all investors, including founder, chief executive officer and chairman José Neves, have been zeroed out, with Coupang now fully in control of the business.
On Wednesday, Coupang did not specify whether there would be any job losses, but sources familiar with the company said it is keen to retain current management, including Neves.
Neves is on leave, and it remains unclear when he will return to the business.
The sources added that business was robust over the holiday season and, going forward, marketing spend would be diverted to “driving transactions” rather than building the Farfetch brand and image.
Coupang is also understood to be taking a “no-nonsense, granular approach” to understanding the Farfetch business as it attempts to tighten and streamline operations.
Negotiations to sell noncore assets in the Farfetch portfolio, such as Browns and New Guards Group, are ongoing, the sources said.
“For the moment, it's business as usual,” said one source with knowledge of the company.
As reported, Style Capital is eyeing the acquisition of New Guards Group, according to Roberta Benaglia, founder and chief executive officer of the Italian private equity firm.
In early December, WWD reported that Browns was also in play, and that Mike Ashley's Frasers Group was an interested buyer. Frasers has since bought Matches, another fashion e-commerce company that saw its valuation plummet due to tighter fiscal controls in the U.S. and Europe.
Separately, the ad hoc group of Farfetch bond holders that's disputing Coupang's purchase of Farfetch said Wednesday they are exploring “possible litigation steps” in the wake of the sale's completion.
As reported on Friday, bond holders in possession of more than half of Farfetch's 3.75 percent convertible senior notes, due in 2027, said they were “mobilizing to challenge” the Farfetch sale.
They argue that Coupang undervalued Farfetch, and that Farfetch was not transparent with regard to its financial difficulties in the months leading up to its fire sale on Dec. 18.
The bond holders have not specified how much money they are seeking.
On Wednesday, the group said that despite Farfetch indicating that it would run a sale process through to the end of April, “the sale has been rushed through, seemingly in the face of investor discontent.”
“The group believes the expedited sale of Farfetch to Coupang is yet another example of serious failings at Farfetch, including a lack of transparency and corporate governance. The unjustified speed of the sale process and bridge loan terms have precluded any proper marketing of Farfetch's assets to other interested parties and fail to maximize asset value for stakeholders,” it said.
A spokesman for the group added: “Farfetch has taken a consensual outcome off the table which would have been in the interests of its investors, shareholders and employees. This is another example of why we are so concerned about Farfetch's actions. We maintain our position and will evaluate all possible litigation steps.”
In the 6-K filing, Coupang noted that “a robust marketing process” was undertaken by JP Morgan on behalf of Farfetch for the sale of all of its business and assets.
Coupang said the process “did not result in a proposal for a competing transaction,” and that on Jan. 30, it and Greenoaks Capital “consummated the purchase” of Farfetch's business and assets through an “English law pre-pack administration process.”
Coupang, which purchased Farfetch alongside its long-term partner, the San Francisco-based firm Greenoaks Capital, is a Fortune 200 company listed on the New York Stock Exchange. It has e-commerce operations and support services in markets including South Korea, Taiwan, Singapore, China and India.
It compares, albeit on a smaller scale, to Alibaba in China and, according to industry sources, has been looking to move upmarket into fashion and luxury goods services.