Just over one month after a deal was first announced, Coupang completed its Farfetch acquisition. The companies will proceed despite opposition from a group of investors who challenged the $500 million acquisition’s short timeline.
The deal, made possible through bridge loans and a partnership with the investment firm Greenoaks Capital Partners, will position Farfetch “to pursue steady and thoughtful growth,” a statement from Coupang states.
Coupang ranks No. 12 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of the top 100 online marketplaces. Farfetch is No. 30.
Why Coupang is acquiring Farfetch
London-based Farfetch faced possible bankruptcy without a dramatic influx of capital to cover its debts. The Coupang deal meant that Farfetch could abandon another proposal from the Swiss luxury goods group Richemont. Under the terms of that deal, Richemont would have taken a minority stake in Farfetch.
“By providing access to $500 million in capital, this acquisition allows Farfetch to continue delivering exceptional services for its brand and boutique partners, and to more than 4 million customers around the world,” Coupang’s statement on Wednesday read.
Investors opposed to the Farfetch acquisition
On Jan. 26, a group of investors calling themselves “the 2027 Ad Hoc Group” declared that it disagreed with the terms of the Coupang deal. They assessed that the sale undervalued Farfetch, based on previous valuation estimates from August 2023. In addition, the group accused Coupang of deterring competing bidders with a “US$1bn ‘poison pill.'”
Initial terms of Farfetch’s Dec. 18 agreement would have provided time to entertain other bidders until April 30.
According to the group’s own press release, the funds managed by institutional investors in the 2027 Ad Hoc Group held “over 50% of Farfetch’s 2027 convertible notes.” Their public move followed a notice of default and acceleration that meant debt to be paid for their notes would be wiped to zero.
“The Group believes this process sets an incredibly dangerous precedent,” stated a spokesperson for the 2027 Ad Hoc Group. “Allowing this transaction to complete fails to maximize the value of the assets of the Company, at a time when at least three other credible parties were publicly reported to be interested in all or parts of the business.”
Farfetch’s SEC filing and message on convertible notes
Farfetch addressed convertible notes in a filing with the Securities and Exchange Commission dated Jan. 31. The filing states that — as a part of its acquisition — debt related to notes such as those described by the 2027 Ad Hoc Group will not be recoverable going forward.
“Farfetch expects that holders of its Class A and B ordinary shares and its convertible notes will not recover any of their outstanding investments in Farfetch, and Farfetch expects to be liquidated,” the company stated in its Form 6-K filing.
Moreover, Farfetch maintains that its efforts to obtain a competitive bid were sufficient.
“Following a robust marketing process undertaken by JP Morgan on behalf of FF PLC for the sale of all of FF PLC’s business and assets, which process did not result in a proposal for a competing transaction, on January 30, 2024, Surpique LP consummated the purchase of FF PLC’s business and assets through an English-law pre-pack administration process (the ‘Sale’),” Farfetch stated in its filing.
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