The Nub

A non-cash write-down refers to a transaction that does not involve a cash payment. It can represent meaningful changes to a company’s financial standing, weighing on earnings without affecting short-term capital in any way. The transaction has been structured in such a way that the buyers, Farfetch and Symphony Global – an investment vehicle of Emirates-based Mohamed Alabbar – will acquire a 47.5% and 3.2% stake, respectively, in Yoox Net-a-Porter. In return, Richemont and Yoox Net-a-Porter will leverage Farfetch’s tech platform, Platform Solutions, to advance their luxury new retail programme, facilitating a shift towards a hybrid retail market model.

Why Does it Matter

Johann Rupert, chair of Richemont, hailed the transaction as a “significant step” towards the realisation of a dream he first voiced in 2015 – a dream of an “independent, neutral, online platform for the luxury industry that would be highly attractive to both luxury brands and their discerning clientele”. “The launch of Richemont Maisons’ e-concessions on the Farfetch marketplace is a step change in our strategy for hard luxury, which represents more than 20% of the luxury industry globally, but just 3% of Farfetch sales, and is an area where we see much stronger customer demand relative to the supply we have had to date,” says José Neves, Farfetch founder, chairman and CEO.

What Next

Upon completion of the sale of 47.5% of Yoox Net-a-Porter’s share capital to Farfetch, Richemont will receive 53 million to 58.5 million Farfetch Class-A ordinary shares, which will represent 10%-11% of the fully diluted share capital of Farfetch and 12%-13% of the issued share capital. Richemont will also receive $250-million, which will be settled in Farfetch Class-A ordinary shares on the fifth anniversary of completion of the initial stage of the transaction. Once that happens, Yoox Net-a-Porter will be free of financial debt, with a minimum of $290-million of cash on its balance sheet, and Richemont will make available, for up to 10 years, a committed credit facility for an additional $450-million that Yoox Net-a-Porter may draw upon at its discretion, subject to certain conditions.