Leading South Korean e-commerce company Coupang Inc. paid $500 million to acquire London-based luxury goods online retailer Farfetch Holdings in order to strengthen its clothes division, which is thought to be a weak point.
The takeover arrangement, which was made public on Monday, provides a lifeline to the fashion platform that is on the verge of bankruptcy just as Coupang is poised to report its first-ever annual profit on record sales this year.
Coupang and US investment firm Greenoaks Capital have teamed up for the acquisition, which will see Coupang own an 80.1% share in Farfetch through a company that will be formed specifically for the transaction. The remaining 19.9% share will be acquired by Greenoaks.
Farfetch will delist from the New York Stock Exchange following the closing of the purchase. According to Coupang, the acquisition will establish it as a market leader in the $400 billion worldwide market for personal luxury items. With the highest per capita spending on personal luxury goods worldwide, South Korea's expanding luxury goods market is expected to provide impetus for its drive into the luxury retail sector.
“Coupang’s 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,” Coupang said in a statement.
Compared to its dominant position in the domestic online groceries and products sector, clothing has been identified as a weakness. Top online retailer Farfetch carries British label Browns in addition to international labels like Chanel, Louis Vuitton, and Yves Saint Laurent. It also sells merchandise from Stadium Goods, a US sneaker resale platform, and streetwear labels like Off-White and Palm Angels.
As part of its efforts to grow into China, it obtained a combined $1.1 billion in investment in 2020 from China's Alibaba and Paris-based Richemont, the owner of Cartier.
It has, however, encountered financial difficulties subsequent to a series of investments and acquisitions. In 2018, the company made its New York Stock Exchange debut and paid $675 million to acquire the Off-White brand's owner, New Guards Group.
Farfetch contributed $200 million to the luxury goods store Neiman Marcus Group in 2022. From its highest market valuation of $23 billion in early 2021, it has plummeted by more than 90% to $250 million.
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