Farfetch Ltd. secured a lifeline from e-commerce company Coupang Inc., which agreed to lend $500 million, buy the assets and delist the troubled fashion platform’s shares.
Coupang, which has its roots in South Korea and is backed by SoftBank Group Corp., said it plans to provide bridge loans to Farfetch via a partnership with investment firm Greenoaks Capital Partners. The deal marks the end of a proposed tie-up between Farfetch and Swiss luxury group Richemont.
JPMorgan Chase & Co. will run a marketing process for all the assets of Farfetch. In the absence of a competing transaction, the partnership between Coupang and Greenoaks will take over Farfetch via a pre-pack administration in the UK—a quick process used to facilitate selling the assets of an insolvent company.
London-based Farfetch had lost more than 90% of its value since its listing five years ago, and existing shareholders will be fully wiped out if the Coupang deal goes ahead. After surging during the pandemic when shoppers splurged on luxury goods from home, the company has burned through cash and struggled to keep fashion brands on its platform as they prefer to build out their own sites.
The shares, listed in New York, were suspended after slumping 35% in premarket US trading before the announcement Monday.
The transaction is supported by a group of creditors holding more than 80% of the company’s $600 million outstanding term loans, which are currently quoted at a discount of around 22% versus their face value, according to a filing. Coupang fell as much as 3.4% in New York.
Seattle-based Coupang has operations in South Korea, Taiwan, Singapore, China, and India.
Farfetch’s operations had been struggling, with the company reporting adjusted losses of $30.6 million in the first half of 2023. Its liquidity was also dwindling, with cash and cash equivalents down 21% versus the same time last year. The retailer said at the end of November it wouldn’t publish its third-quarter results and withdrew its guidance for the year.
Farfetch has also been cutting 800 jobs to reduce expenses. The company, founded in 2007 by Jose Neves, sells luxury goods in 190 countries.
The deal will end a proposed tie-up between Farfetch and Swiss Cartier owner Richemont. That company said Monday it’s abandoning the plan to sell a majority stake in its Yoox Net-a-Porter online unit in exchange for Farfetch shares.
Unveiled in August 2022, the proposed YNAP deal would have seen Farfetch buy 47.5% of the Richemont platform. Richemont said it’s now evaluating alternatives.
Richemont also said it expects that $300 million convertible senior notes issued by Farfetch and held by the Swiss company will not be repaid. Richemont dropped as much as 2.2% in Zurich.