Richemont sells YNAP stake to Farfetch in complex "landmark" deal
There was big news… no, make that huge news… on the luxury e-tail front on Wednesday as Swiss giant Richemont said Farfetch and Alabbar are to acquire 47.5% and 3.2% stakes, respectively, in Yoox Net-A-Porter, “making YNAP a neutral platform with no controlling shareholder”.
That neutral status may not last, however, as Farfetch will have the option to acquire the remainder of YNAP.
The deal has massive implications both for YNAP and for Richemont's own labels. In practical terms it means YNAP will adopt Farfetch Platform Solutions “to advance growth and shift towards a hybrid [retail-marketplace] business model”. Richemont’s own brands will also adopt the Platform Solutions tech “to advance the realisation of their Luxury New Retail (LNR) vision”.
Those brands — including AZ Factory, Baume & Mercier, Cartier, Chloé, Dunhill, Jaeger-LeCoultre, Montblanc, Van Cleef & Arpels and more — will open e-concessions on the Farfetch Marketplace.
It’s a massive development that has been in negotiation for some time, and in announcing the deal, Richemont, Farfetch and Alabbar (through Symphony Global, one of the investment vehicles of Mohamed Alabbar) called it a “landmark transaction towards the digitalisation of the luxury industry”.
Richemont said it “represents a significant step in achieving [our] vision of making YNAP a neutral industry-wide platform, and lays a path towards Farfetch potentially acquiring the remaining shares in YNAP, bringing together these highly complementary businesses. The partnership also marks a step change in Richemont Maisons’ omnichannel distribution capabilities”.
As well as Richemont having a giant outlet to reach customers with its brands, the deal will boost Farfetch’s watches and jewellery offering.
Farfetch said the announcement highlights that its platform is “well-positioned to deliver end-to-end capabilities for the luxury industry, and [it] envisions further collaboration on innovative technology solutions to be made available to luxury brands and retailers to meet the increasing omnichannel demands of the luxury customer”.
NEW BUSINESS MODEL
The partners said that with YNAP (which includes Yoox, The Outnet, Net-A-Porter and Mr Porter) adopting the Farfetch tech, it will “significantly advance the rollout of YNAP’s marketplace offering, as Farfetch’s platform is already connected with the inventory of many of YNAP’s luxury brand partners”.
YNAP has aced challenges for some time and its move towards a hybrid business model will be more asset-light, “complementing [its] first-party curated inventory ownership with a third-party e-concession/marketplace offer”. This is expected to “improve YNAP’s financial performance while customers, in turn, will enjoy an enriched shopping experience”.
It’s a complex deal and as mentioned, YNAP will initially have no controlling shareholder and there will be no requirement for Farfetch to consolidate it at this stage.
But the companies are clearly interweaving parts of their businesses very closely. On completion of the sale of 47.5% of YNAP’s share capital to Farfetch, Richemont will receive Farfetch shares adding up to 10%-11% of the fully diluted share capital of that business. Richemont will also receive $250 million, expected to be settled in shares.
YNAP will be left debt-free and will have almost $300 million in cash on its balance sheet, while Richemont “will make available, for up to 10 years, a committed credit facility for $450 million that YNAP may draw upon at its discretion, subject to certain conditions”.
And what’s Alabbar’s role in all of this? It’s Richemont and YNAP’s longstanding partner in the key Gulf States and so will become a minority shareholder in YNAP in exchange for its shares in the joint venture with YNAP in the Gulf Cooperation Council region. It means YNAP will own 100% of its business in the region.
Following the announcement, Richemont’s investment in YNAP will be classified as an asset ‘held for sale’ and YNAP’s results will be presented as discontinued operations in Richemont’s consolidated interim financial statements for the six months ending 30 September.
YNAP will now be governed by a board of seven directors, with three representatives of each of Richemont and Farfetch and one representative of Alabbar.
Johann Rupert, Chairman of Richemont, said: “Today’s announcement is a significant step towards the realisation of a dream I first voiced in 2015 of building an independent, neutral online platform for the luxury industry that would be highly attractive to both luxury brands and their discerning clientele. We knew back then that if we wished to control our own destiny and protect the uniqueness of the luxury industry as it was digitalised, we would need to collaborate as the task was too big to undertake on our own.
“Farfetch’s sophisticated technology will enable Richemont Maisons to benefit from the best route to market and realise their Luxury New Retail vision, while implementing a hybrid model at YNAP will greatly enhance its prospects.”
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