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Richemont Takes Cautious Stance Amid Farfetch's Privatization Contemplation

Richemont Takes Cautious Stance Amid Farfetch's Privatization Contemplation

Luxury goods conglomerate Richemont, the owner of iconic jeweler Cartier, announced on Wednesday that it will not inject any cash into the troubled online luxury retailer Farfetch, following reports that the latter is exploring the possibility of going private. Farfetch's founder, Jose Neves, is reportedly considering this move after the company experienced difficulties following its listing on the New York Stock Exchange, coupled with financial challenges.

Farfetch, a British company facing losses, has been working with advisors at JP Morgan to evaluate the prospect of delisting. Founder Jose Neves, who holds a 15% stake in the company, is reportedly navigating the complexities of such a move. Richemont, which had previously arranged to sell its Yoox Net-A-Porter (YNAP) online fashion and accessories business to Farfetch, clarified its position on the matter.

In a statement released on Wednesday, Richemont stated that it was "carefully monitoring the situation" and reviewing its options regarding the deal announced in August 2022. The deal involves Richemont receiving an initial 58.5 million Farfetch shares. Importantly, Richemont underscored that it has no financial obligations toward Farfetch and does not foresee lending or investing in the online luxury retailer.

Richemont shareholders responded positively to the announcement, with the company's stock gaining 1.6% in early trading in Zurich. Analysts have speculated on the potential implications of Farfetch's delisting on the YNAP deal. Royal Bank of Canada suggested that a delisting could prompt attempts to renegotiate or reconsider the deal, while others opined that it could diminish the likelihood of the deal materializing.

A source familiar with the matter stated that Richemont had "definitely no intention" of injecting funds into Farfetch but refrained from commenting on whether a delisting would nullify the existing deal. Analysts, such as Patrik Schwendimann from Zuercher Kantonalbank, interpreted Richemont's statement as a clear signal of distancing from Farfetch, suggesting that the likelihood of the transaction proceeding has decreased.

Richemont's statement emphasized that neither its divisions nor YNAP have adopted Farfetch's platforms, and they will continue to run their own sales platforms independently. This strategic positioning is seen as a move to facilitate an easier untangling from the arrangement with Farfetch, potentially allowing Richemont to seek new buyers or technology partners for YNAP.

The YNAP deal, agreed upon last year, involved Richemont selling a 47.5% stake to Farfetch, with the possibility of the latter acquiring the remaining stake. However, Farfetch's recent financial troubles, reflected in a steep drop in its share price, have raised questions about the viability of the deal. The situation has become even more uncertain with Farfetch's decision not to announce its third-quarter results on the scheduled date, citing an inability to rely on previous forecasts or guidance. As both companies navigate this complex landscape, the luxury goods industry watches closely to see how this saga will unfold.

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