Swiss luxury group Richemont has delivered a long-promised deal to sell a majority stake in its unprofitable ecommerce operation Yoox Net-a-Porter to online rival Farfetch and an Emirati investor.
The divestment will require Richemont to take a €2.7bn non-cash writedown on the value of Yoox Net-a-Porter, which it had built largely through acquisitions since 2010.
The business had become an expensive headache for the group that owns Cartier in recent years as nimbler rivals including Farfetch attracted fickle fashion customers with savvy marketing and new services while Richemont stumbled over technology upgrades.
Some investors had been pushing Richemont to offload YNAP, including activists who began to target the company last year, arguing that it should focus on its biggest brands Cartier and Van Cleef & Arpels that generate all of the group’s profit.
Richemont had said it was in “advanced talks” to cede control of YNAP to Farfetch last year, but a crash in the latter’s share price appeared to have complicated reaching final terms. New York-listed Farfetch’s shares are down 80 per cent over the past year. Richemont’s shares rose 1.6 per cent in early trading on Wednesday.
One of the activists at Richemont, Bluebell Capital, is campaigning for changes to the board of directors and has submitted three resolutions for a vote at an upcoming shareholder meeting on September 7.
Under the terms of the deal, YNAP will not have a controlling shareholder, and Richemont will deconsolidate the business from its books although it will retain a 49.3 per cent stake.
Farfetch has agreed to acquire 47.5 per cent of YNAP and pay Richemont with between 53mn and 58.5mn Farfetch shares, as well as an additional $250mn worth of shares five years after the deal is completed. Richemont will end up with a 12 to 13 per cent stake in Farfetch.
Alabbar, a group backed by Emirati businessman Mohamed Alaabar that has long been a partner of Richemont’s in the Middle East, will also acquire 3.2 per cent of YNAP.
Richemont and Farfetch have put and call options that would allow Farfetch to acquire the remainder of YNAP in the next five years or for Richemont to sell to another investor or list the shares.
“This represents a significant step in achieving Richemont’s vision of making YNAP a neutral industry-wide platform,” the group said in a statement. It sets out a path towards “Farfetch potentially acquiring the remaining shares”.
Some of Richemont’s brands are expected to migrate their ecommerce operations to Farfetch’s tech platform.
Jean-Philippe Bertschy, analyst at Vontobel, welcomed what he called “a long wait for a painful exit from online” for Richemont.
“Excellent news for Richemont, at last,” he wrote in a note “The deal closes years of underperformance and heavy investment in YNAP.”
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