THE WHAT?  European authorities have approved Farfetch’s acquisition of a 47.5% stake in Yoox Net-A-Porter (YNAP) from Richemont. Completion of the deal is still subject to certain conditions being met by both parties, with an update promised in due course. Under the agreement, Richemont will sell the stake in YNAP in exchange for over 50 million Farfetch shares, with an option for Farfetch to acquire the remaining stake in YNAP later.

THE DETAILS  Farfetch has faced financial challenges, including a drop in orders from U.S. retailers and a shift in inventory sources, leading to difficulties in attracting customers with promotions. The company has yet to reach profitability due to high technology and marketing costs. The acquisition of YNAP has raised questions for Richemont, as they are set to transition their online business to Farfetch’s technology and provide a $450 million credit facility.

THE WHY? Despite receiving EU approval, there are uncertainties surrounding the deal, mainly due to Farfetch’s financial struggles and the 90% drop in their share value over the past two years. Analysts at Citi have noted that while EU approval is a small positive step, several uncertainties remain. Additionally, the instability in Farfetch’s financial situation could potentially affect the broader industry, including the numerous Italian boutiques and major department stores that depend on Farfetch’s platform and technology.