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Farfetch investors aren’t happy about the proposed Coupang acquisition — and now a group of them are fighting back.
On 26 January, a group of bond holders, including investment firm Fir Tree, issued a statement announcing they’ve enlisted legal and financial advisors in order to “urgently” explore alternate options to the takeover. The investors — which have dubbed themselves “the 2027 Ad Hoc Group” — hold over 50 per cent of Farfetch’s convertible senior notes, due in 2027 and worth more than $1 trillion. If the deal goes through, the interest on the notes (and other Farfetch-issued debt) will be wiped to zero. The group said they have declared a default and acceleration on their 2027 notes, which makes the debts due immediately in full.
In December 2023, Farfetch announced that the “Amazon of Asia”, South Korean internet giant Coupang, would acquire the luxury marketplace and provide it with $500 million in emergency funding. If approved, the deal will take the company private and wipe out shareholders’ investments. Shares fell 38 per cent in pre-market trading following the announcement, hitting an all-time low. The group says that the Coupang deal devalues the company, and that its “poison pill” — a term of the deal that would require any other bidder to pay a $1 billion fee — renders alternative offers unviable. Farfetch declined to comment.
“The group believes this process sets an incredibly dangerous precedent,” a spokesperson for the 2027 Ad Hoc Group said in a statement. “Allowing this transaction to complete fails to maximise 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.”
South Korean e-commerce giant Coupang has agreed to acquire Farfetch in a rescue deal — leaving Richemont re-evaluating options for Yoox Net-a-Porter.
Neil Saunders, managing director and retail analyst at Globaldata, says that while investor push back is not uncommon in these types of deals, banding together to create a unified group is rare. “The formation of Ad Hoc Group shows the deep dissatisfaction many investors have with the Coupang deal,” Saunders says. “They believe that Farfetch rushed into this in desperation and has not sufficiently investigated alternatives. Ad Hoc Group is now essentially doing that work for Farfetch.”
Part of the reason for challenging the deal is related to the pace at which it unfolded, with the group expressing “serious concerns” over the four-month period between Farfetch’s August 2023 guidance for year-end liquidity of $800 million and the distressed sale in December. At the time of the sale, the group says, analysts including JPMorgan valued the company at more than $3 billion. “As such, the group is seriously concerned by the rapid and unexplained deterioration in the financial position of Farfetch between August and December 2023,” the statement reads.
The group believes that Farfetch assets could garner better value via different routes to the proposed sale, such as the break-up and sale of assets — like New Guards Group — to different bidders. This may be so, but to make their case, they’ll need evidence, Saunders says.
“As much as Ad Hoc Group may have a point about the Coupang deal undervaluing the company, to change course they are going to have to produce a compelling alternative that works financially,” Saunders says. “If they don’t, then the status quo will likely prevail. That said, this really increases pressure on Farfetch’s management team and, to a certain extent on Coupang, to justify their arrangement.”
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