ZURICH (Reuters) – European authorities have approved Farfetch’s purchase of a stake in rival Yoox Net-A-Porter (YNAP), owned by Richemont, the Swiss luxury group announced on Monday.
This was the last regulatory authorization necessary for the operation, Richemont said.
The finalization of the operation remains subject to “certain other conditions that Richemont and Farfetch strive to meet”, indicated Richemont, promising a new update “in due course”, without giving further details.
Under the terms of the agreement unveiled in August 2022, Farfetch will acquire a 47.5% stake in the loss-making company YNAP in exchange for 50 million of its shares, sold to Richemont. Farfetch could acquire the remainder of YNAP through a put and call options agreement.
But the operation was complicated by Farfetch’s financial difficulties.
The company has developed a business model for luxury brands to embrace online sales, but the company has yet to break even due to high technology and marketing costs.
Last week, Bernstein analysts said Farfetch’s difficulties raised questions for Richemont, which plans to move its online business to Farfetch-run technology and provide a $450 million credit line ($424.49 millions of euros).
Farfetch stock has lost more than 90% of its value over the past two years, with its market capitalization falling from $26 billion to just over $1 billion.
Monday’s announcement of the EU’s approval of the deal is a “small positive”, Citi analysts said, stressing however that “some uncertainties remain”, notably the sharp fall in the share price from Farfetch since the deal was first announced.
Farfetch’s difficulties “could have knock-on effects on an already struggling sector,” Bernstein warned. More than 500 Italian boutiques rely on the platform and department stores Harrods and Bergdorf Goodman rely on the company’s technology.
(Reporting John Revill and Mimosa Spencer; French version Gaëlle Sheehan, edited by Blandine Hénault)
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