Coupang to acquire UK online luxury firm Farfetch for $500 million

Coupang's banner is attached on the building of the New York Stock Exchange on March 11, 2021, ahead of its debut on the U.S. bourse. [YONHAP]

New York-listed Korean e-commerce giant Coupang will acquire Farfetch Holdings, a London-based online luxury shopping company, for $500 million.

The acquisition is poised to intensify competition, not only with existing hypermarket chains like Emart and Lotte Mart but also with Korean department stores that handle high-end brands.

"Coupang’s operational excellence and innovative logistics combined with Farfetch’s leading role in the luxury ecosystem will drive exceptional experiences for customers, boutiques and brands across the world," Coupang said in a statement Monday. "Coupang is also uniquely positioned to unlock Farfetch’s tremendous value for the vast personal luxury goods segment in Korea, which has the world’s highest per-capita spending on personal luxury goods."

Coupang, in collaboration with Greenoaks Capital Partners, has established a limited partnership named Athena Topco to facilitate the acquisition. Under this arrangement, Coupang will hold an 80.1 percent equity interest, and Greenoaks will have a 19.9 percent stake. They will fund commitments and obligations using a bridge loan for Farfetch. The transition will see Farfetch, originally listed on the New York Stock Exchange in 2018, become a private company.

Founded in the UK in 2007, Farfetch operates globally in over 190 countries and collaborates with 1,400 brands, boutiques, and department stores. Despite achieving a revenue of $2.31 billion last year, Farfetch is facing bankruptcy, partly attributed to the economic slowdown impacting luxury spending.

"Farfetch is a landmark of the luxury landscape and has been a transformative force in demonstrating that online luxury is the future of luxury retail," Coupang's founder and CEO Bom Kim said. "Farfetch will rededicate itself to providing the most elevated experience for the world's most exclusive brands, while pursuing steady and thoughtful growth as a private company."

The acquisition comes on the heels of Coupang's entry into luxury beauty with the launch of 'Rocket Luxury', a shopping service hosting high-end cosmetic brands, in July. Coupang aims to strengthen its fashion and luxury offerings, addressing a relative gap compared to its high sales in fresh produce and home appliances.

"This acquisition positions Coupang as a leader in the $400 billion global personal luxury goods segment," Coupang said in the statement. "Coupang is also uniquely positioned to unlock Farfetch’s tremendous value for the vast personal luxury goods segment in Korea, which has the world’s highest per-capita spending on personal luxury goods."

Industry insiders also anticipate a boost in the export of K-fashion, with Farfetch currently featuring over 10 Korean brands, such as Wooyoungmi, Songzio, Low Classic and Studio Tomboy. Analysts suggest that the integration of Coupang's super-fast Rocket Delivery could expedite luxury goods delivery to and from Korea, contributing to the expansion of the market.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]