ZURICH (Reuters) -European authorities have approved online luxury retailer Farfetch (NYSE:FTCH)'s purchase of a stake in rival Yoox (BIT:YNAP) Net-A-Porter from Richemont in the last regulatory approval needed, Richemont, the owner of Cartier, said on Monday.
Completion of the deal remains subject to "certain other conditions that Richemont and Farfetch are working towards fulfilling", Richemont said, promising a further update "in due course", without providing further detail.
Under the terms of the deal unveiled in August 2022, Richemont would sell a stake of 47.5% in loss-making YNAP in exchange for more than 50 million Farfetch shares, and Farfetch could acquire the rest of YNAP through a put and call option arrangement.
But the deal has been complicated by financial struggles at Farfetch, which has come under pressure as U.S. retailers slash orders and more inventory comes from brands rather than wholesale clients, limiting its ability to draw in shoppers with promotions.
The U.S.-listed company pioneered an innovative business model that persuaded many luxury brands to embrace online sales, but has yet to reach break-even because of high technology and marketing costs.
Bernstein analysts said last week that Farfetch's troubles raised questions for Richemont, which is set to transfer its online business to technology run by Farfetch and provide a $450 million credit facility.
Farfetch shares have lost more than 90% of their value in the past two years, with its market capitalisation plunging from $26 billion to just over $1 billion.
They slumped by 40% in a single day in August following a gloomy annual sales outlook due to weaker-than-expected demand in the U.S. and Chinese markets.
Monday's announcement of EU clearance of the deal marks a "small positive", said analysts at Citi, noting that "a few uncertainties remain", citing the steep drop in Farfetch's share price since the deal was first announced.
Farfetch's troubles "could have ripple effects through an already suffering industry", according to Bernstein, as more than 500 Italian boutiques depend on the platform and department stores Harrods and Bergdorf Goodman rely on its technology.
Richemont reports half year results on Nov. 10.