Coupang finalizes the purchase of the troubled Farfetch company

Updated at 2:30 PM EST

LONDON — Coupang confirmed Wednesday that it had completed its acquisition of Farfetch Holdings plc, drawing the ire of long-term bondholders who said they were exploring “possible legal action” as a result of the sale.

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Coupang, which first announced the deal on December 18, said that by providing access to $500 million in capital, Farfetch “will continue to provide exceptional services to its brands and boutique partners” and more than 4 million customers worldwide.

The e-commerce company added that by leveraging its operational and logistical expertise, “Fafetch is now well positioned to continue its steady and deliberate growth.”

Coupang also filed a Form 6-K with the U.S. Securities and Exchange Commission, confirming the purchase of Farfetch and upholding the terms of the transaction.

It said Farfetch expects that holders of its Class A and B common shares and convertible notes “will not recover any outstanding investment in Farfetch and Farfetch expects to be liquidated.”

Jose NevesJose Neves

Jose Neves from Farfetch

As reported, Coupang bought Farfetch as part of a “pre-pack”, i.e. a planned administrative process. London-based Farfetch had long struggled to turn a profit and was running low on cash as interest rates rose and technology valuations fell.

As a result of the sale, all investors, including founder, CEO and president José Neves, were eliminated, and Coupang now has full control of the company.

On Wednesday, Coupang did not specify whether there would be job losses, but sources familiar with the company said it wanted to retain current management, including Neves.

Neves is on leave and it is unclear when he will return to the company.

Sources added that business was growing well over the festive period and in the future, marketing spend would be directed towards “dealing” rather than building Farfetch’s brand and image.

Coupang is also said to be taking a “sensible, detailed approach” to understanding Farfetch’s business as it tries to tighten and streamline operations.

Sources say negotiations to sell non-core assets in Farfetch’s portfolio, such as Browns and New Guards Group, are ongoing.

“Everything is business as usual at the moment,” said one source with knowledge of the company.

As reported, Style Capital is considering acquiring New Guards Group, according to Roberta Benaglia, founder and CEO of the Italian private equity firm.

In early December, WWD reported that Browns was also in play and that Mike Ashley’s Frasers Group was an interested buyer. Frasers has since bought Matches, another fashion e-commerce company whose valuation has fallen due to tighter fiscal controls in the US and Europe.

Moreover, an ad hoc group of Farfetch bondholders that is challenging Coupang’s purchase of Farfetch said on Wednesday that it is exploring “possible legal action” once the sale is finalized.

As reported on Friday, bondholders holding more than half of Farfetch’s 3.75% convertible senior notes due 2027 said they were “mobilizing to oppose” the sale of Farfetch.

They claim that Coupang undervalued Farfetch and that Farfetch failed to be transparent about its financial difficulties in the months leading up to the December 18 sale.

The bondholders did not specify the amount they are demanding.

On Wednesday, the group said that despite Farfetch’s indication that the sale process would last until the end of April, “the sale was carried out in haste, apparently in the face of investor dissatisfaction.”

“The group believes that the accelerated sale of Farfetch to Coupang is another example of Farfetch’s serious failings, including a lack of transparency and corporate governance. “The unreasonable speed of the sale process and the terms of the bridge loan prevent the proper sale of Farfetch’s assets to other interested parties and do not maximize the value of the assets to interested parties,” it said.

A spokesman for the group added: “Farfetch has rejected the idea of ​​a compromise outcome that would be in the interests of its investors, shareholders and employees. This is another example of why we are so concerned about Farfetch’s actions. We maintain our position and will analyze all possible stages of the legal proceedings.”

In its 6-K filing, Coupang noted that J.P. Morgan conducted a “robust marketing process” on Farfetch’s behalf to sell its entire business and assets.

Coupang said the process “did not result in a competitive transaction proposal” and that on January 30 he and Greenoaks Capital “completed the purchase” of Farfetch’s business and assets through a “pre-pack administration process under English law.”

Coupang, which purchased Farfetch with its long-term partner, San Francisco-based Greenoaks Capital, is a Fortune 200 company listed on the New York Stock Exchange. It operates e-commerce and support services in markets including South Korea, Taiwan, Singapore, China and India.

It is being compared, although on a smaller scale, to Alibaba in China and, according to industry sources, is trying to move services from the upscale segment to services related to fashion and luxury goods.

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