British online luxury fashion retail platform Farfetch (GB: FTCH) saw shares rise 26.15% following the long-awaited news that YOOX would buy a 47.5% stake in Net-A-Porter, a subsidiary of Swiss luxury giant Richemont (CFRUY).
Richemont shares also rose 3.5% on the news, as Farfetch became one of the day’s top gainers on TipRanks.
Farfetch will acquire a 47.5% stake in YOOX Net-A-Porter in exchange for 50 million FarFetch shares, valued at $440 million.
Source of losses for Richemont
Richemont said it expected a write-down of 2.7 billion euros in connection with the deal: the group took full control of YNAP at a valuation of five billion euros.
Farfetch CEO Jose Neves said, “This investment and the work we will be doing with Farfetch Platform Solutions for YNAP will pave the way for a possible acquisition by Farfetch, which would create a complementary portfolio of iconic luxury destinations, attracting demographics different, price points and regions.”
Bernstein analyst Luca Solca wrote in a research note, “This looks like very good news for both companies. Richemont will finally remove YNAP from its perimeter … Farfetch secures number two in multi-brand digital distribution.
“Preta facie, this looks like a great deal for Farfetch.”
Solca said Richemont will remove a “constant source of losses”
View from the City
According to TipRanks analyst rating consensus, Farfetch stock is a Moderate Buy. This is based on ratings from 11 analysts, of which seven are Buy and four are Hold.
The average price target is $15.36, indicating a 95.42% upside from the current price. The analyst price target has a high and low forecast of $30 and $8, respectively.
Why is Farfetch so popular?
The deal will see Farfetch benefit from a boost in traffic from e-concession deals with Richemont labels, analysts believe.
