Farfetch Investors Object to Coupang’s Acquisition

Last December, the news that the South Korean e-commerce giant Coupang had acquired the ailing luxury e-commerce platform Farfetch, rescuing it from the brink of bankruptcy, was still fresh in the minds of many. However, the acquisition plan seems to have hit a snag.

The deal was originally slated to close in 2024 but faces opposition from a consortium of investors from the British luxury retailer. A group of institutional investors called the 2027 Ad Hoc Group currently holds more than 50% of Farfetch’s 2027 convertible bonds. These investors are concerned that if the sale by Coupang goes through, the interest on the 2027 bonds will be reduced to zero, as will other debt issued by Farfetch.

On the other hand, the terms of the agreement signed by both Coupin and Farfetch on December 18, 2023, provide that Coupang will provide Farfetch with “access to $500 million (€457 million) of capital to continue to provide brands and exclusive boutiques with cutting-edge, bespoke technology and give leading designers access to consumers around the world”.

If the deal goes through, Farfetch will receive zero interest on the 2027 Notes and other debt issued by Farfetch. The Group has a limited timeframe to prevent the proposed acquisition of Coupang, which spans from the present moment until April 30, the closing date of the deal. Therefore, they appointed investment bank Ducera Partners as financial adviser, and London, New York-based Pallas Partners as legal counsel to urgently consider our options.

In a statement, the 2027 Ad Hoc Group pointed out, “serious reservations about the manner in which Farfetch went from being the market leader at the end of the 2023 financial year with cash in excess of $800 million in August 2023, to a fire sale four months later.” The group also mentions, “At the time the deal was announced, the consensus of analysts estimated Farfetch’s enterprise value at over $3 billion.” They expressed deep concern about the rapid and inexplicable deterioration in Farfetch’s financial condition between August and December 2023.

A spokesperson for the 2027 Ad Hoc Group said as follows: “The group believes this process sets an incredibly dangerous precedent.” “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. The group is urgently considering appropriate next steps.”