Richemont separates from Yoox Net-a-Porter, Farfetch expands – Explained and Analyzed
After months of discussions, the Swiss luxury group Richemont has decided to separate from part of the Yoox Net-a-Porter e-commerce group in favor of Farfetch, which is taking the opportunity to acquire 47.5% of it while that the Emirati businessman, Mohamed Alabbar, acquires 3.2%.
The luxury e-commerce sector is experiencing a revolution where the cards are redistributed in favor of Farfetch, which seems unstoppable. It is clear that this agreement leaves YNAP without majority shareholders, which raises questions about the direction that the platform will take in the months to come.
But then why this decision on the part of the Richemont group? Indeed, YNAP was not profitable and only lowered the overall value of the group. A decision which therefore comes from pressure from shareholders who are looking for a better valuation of the group; which, except for YNAP, is recording very good results with its other houses.
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The sale was structured so that Farfetch would pay Richemont by paying $440 million in stock at the time of the sale while $250 million is expected to be paid within 5 years, with an option for Farfetch to acquire a larger share of YNAP in the coming years. This arrangement brings YNAP’s capitalization to around 2.7 billion euros, well below what Richemont initially paid out when it bought the platform in 2018.
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<p>Given these figures, we might wonder what there is to gain for Farfetch in a business that seems to be perilous, even for one of the largest luxury groups. Despite everything, Farfetch seeks to establish a leadership in luxury e-commerce by using this acquired knowledge and technologies developed in order to optimize the costs and operating methods of the various YNAP platforms. Farfetch will also be able to benefit from advantageous contracts with the various houses of the Richemont group such as Cartier, Van Cleef & Arpels or Chloé and Alaïa.</p>
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<p>Finally, regarding the future of YNAP’s platforms, Farfetch plans to focus its attention, for Net-a-Porter and Mr Porter, on the young generations as well as on the big fortunes by focusing on the Asian regions as well as the Middle Eastern countries. For Yoox on the other hand, the work will focus on a responsible vision of fashion with an emphasis on second hand as well as resale.</p>
<p>In this context, Richemont, relieved of the weight that weighed on its reports and financial results, will be able to focus on its more traditional luxury houses, while Farfetch will have to overcome the task of integrating YNAP’s platforms into its systems, while maintaining its leading position in luxury e-commerce. But beware of other players who might see this transition period as an opportunity to boost their market share. </p>
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