Coalition of Noteholders Gears Up to Contest Coupang’s Acquisition Bid for Farfetch

The 2027 Ad Hoc Group made an announcement today about its formation to assess options regarding Coupang’s proposed acquisition of the Farfetch business. Comprising institutional investors with a combined AUM exceeding US$1 trillion, holding over 50% of Farfetch’s 3.75% Convertible Senior Notes due 2027, the Group has engaged Pallas Partners as legal counsel and Ducera Partners as financial advisors. Their objective is to promptly evaluate strategies to safeguard their interests against perceived value destruction resulting from the proposed Coupang sale.

In an initial move, the Group members declared a default under the 2027 Notes, accelerating them to become immediately due and payable in full. This default stemmed from Farfetch’s trading suspension and delisting from the New York Stock Exchange, enforced due to the planned sale to Coupang.

The Group expresses significant apprehensions about the abrupt shift in Farfetch’s financial position, transitioning from an anticipated YE 2023 liquidity of over US$800 million in August 2023 to a distressed sale four months later. At the time of the agreement announcement, analyst consensus estimated Farfetch’s enterprise value to exceed US$3 billion. The Group is troubled by the rapid and unexplained deterioration in Farfetch’s financial standing between August and December 2023.

Moreover, the terms of the transaction support agreement (TSA) with Coupang, Greenoaks, and others, entered into on December 18, 2023, pose a risk of rendering it unfeasible for alternative bidders to present a value-maximizing offer. Pursuing an alternative transaction could result in a substantial fee, deterring other bidders and potentially causing further value destruction.

The Group believes that exploring alternative routes, such as a break-up sale of assets to interested bidders, could yield better value for Farfetch’s assets compared to the proposed sale. Allegedly lacking transparency or governance, this process has reportedly left Farfetch’s luxury retail partners uneasy, with the departure of all independent directors from the Board adding to concerns.

A spokesperson for the 2027 Ad Hoc Group highlighted the potential danger of allowing this transaction to proceed, asserting that it fails to maximize the company’s asset value. The Group contends that at least three other credible parties had expressed interest in some or all of the business, urging a reconsideration of the next steps.

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