Richemont, a Swiss luxury goods company controlled by South African billionaire Johann Rupert, has finally opted to sell a 50.7-percent stake in Yoox Net-a-Porter (YNAP), an Italian online fashion retailer, to Farfetch and Emirati tycoon Mohamed Alabbar.
The decision came after more than 10 months of consideration on whether to sell down holdings in the loss-making online retailer, which continues to generate losses for the Swiss luxury goods firm on a yearly basis.
Richemont would sell 47.5 and 3.2 percent of its YNAP stakes, respectively, to Farfetch, a British-Portuguese online luxury clothes retail platform, and Symphony Global, one of the investment companies belonging to Emirati tycoon Mohamed Alabbar, who is behind the Dubai Mall.
Richemont will examine the fair value write down pertaining to its investment in YNAP at about €2.7 billion ($2.7 billion) as part of the transaction, which values YNAP at around €1 billion ($1 billion). The number is subject to variation according to an assortment of factors, including Farfetch’s listed share price and the dollar and euro exchange rates.
Richemont also said its stake in YNAP will be classed as “held for sale” in its consolidated interim financial statements for the six months ending Sept. 30, and that a controlling shareholding in YNAP will be sold within the next 12 months.
The move signals a tipping point in a debate over measures that could improve Richemont’s valuation, as many institutional investors believe the Swiss luxury goods group’s market capitalization is lower than that of its industry peers, such as French luxury goods giant LVMH and Hermes.
Last year, U.S. hedge fund Third Point Management and Artisan Partners, one of Richemont’s long-term owners, pressured the luxury goods company to cut its exposure to loss-making companies like YNAP to enhance its financial performance and valuation.
UK fund manager Bluebell Capital Partners has recently advised the luxury goods firm to focus on its core operations, which include jewelry and watches.
Bluebell Capital Partner Marco Taricco believes Richemont should consider rebranding itself as the Cartier Group to leverage its “great, iconic brand” and minimize its valuation deficit to French conglomerates LVMH and Hermes.
