On August 10, 2023, the high-profile merger between U.S.-based luxury houses Capri Holdings and Tapestry Inc. was called off after a legal challenge from the Federal Trade Commission (FTC). The companies mutually decided to terminate the $8.5 billion deal as it was unlikely to gain regulatory approval before its expiration in February. The merger aimed to combine Tapestry’s Coach, Kate Spade, Stuart Weitzman with Capri’s Versace, Jimmy Choo, and Michael Kors under one umbrella.
Capri’s CEO, John Idol, expressed confidence in the company’s growth potential following the deal’s dissolution. Tapestry CEO Joanne Crevoiserat emphasized the brand’s independent growth strategy and announced a $2 billion stock repurchase plan funded by cash and debt. Notably, there will be no break fee, but Tapestry will reimburse Capri approximately $45 million in expenses related to the failed merger.
The FTC’s legal action argued that the merger would disadvantage consumers and employees, and a federal judge supported this stance with a preliminary injunction. Although Tapestry initially planned to appeal, the companies have now shifted focus toward independent growth.
Market reactions were immediate, with Capri’s stock suffering a 50% plunge while Tapestry saw a 10% surge after the judge’s ruling. The recent announcement influenced further stock shifts, with Tapestry rising 6% and Capri falling by the same margin ahead of the market opening.
Capri is set to address analysts to discuss its strategy aimed at revitalizing its core brand, Michael Kors, which has faced declining sales. Idol outlined plans focusing on enhancing brand desirability and consumer experience across its luxury lines. Meanwhile, Wall Street analysts had become skeptical about the merger, suggesting Tapestry was set to overpay given Capri’s business challenges and the prolonged approval process.
Original Story https://www.cnbc.com/2024/11/14/capri-and-tapestry-abandon-plans-to-merge.html
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