Tapestry and Capri Terminate $8.5B Merger Agreement
Tapestry Inc. and Capri Holdings are officially going their own way.
The two companies agreed to terminate their merger agreement, which would have given the Michael Kors parent Capri an enterprise value of $8.5 billion and put the company under the umbrella of Tapestry, which already owns Coach and Kate Spade.
The Federal Trade Commission challenged the deal on antitrust grounds, arguing that it would create an accessible luxury handbag giant with enough sway to hurt consumers, boosting prices by $365 million annually.
Technically the deal was on pause pending a full trial, but that process would not wrap up before the Feb. 10 expiration of the merger contract.
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While Tapestry is seen as in a strong position to continue to drive Coach forward as it turns around Kate Spade, Capri is on shakier ground and has seen its business weaken dramatically since the deal was cut in August 2023.
Now Capri, which in addition to Michael Kors owns Versace and Jimmy Choo, is starting the process of picking itself up and will discuss its strategy in an investor call later Thursday morning.
“Looking ahead, I remain confident in Capri’s long-term growth potential for numerous reasons,” said John Idol, chairman and chief executive officer, in a statement. “First, we have an incredible portfolio of luxury houses, each with their own rich heritage, exclusive DNA and strong consumer loyalty. Second, we have a solid distribution network to build upon. With over 1,200 directly operated luxury retail locations globally combined with our robust digital platform we have a strong framework for the future. Additionally, our extensive wholesale network serves as an important channel to reach consumers in areas where we do not have our own stores. Third, we have the management team, design talent and a global workforce of 15,000 employees to successfully execute our initiatives. Fourth, we have the financial strength to implement our strategies.”
Idol said the company has been focused on “brand desirability through exciting communication, compelling product and omni-channel consumer experience.”
Specifically at Michael Kors, the company plans to cut about 155 stores over time, trimming its fleet down to 650 doors while renovating roughly 150 locations. The brand is also working to appeal to a broader consumer base with increased marketing investments while rebuilding its core and signature assortments.
For its part, Tapestry said it would look to drive its organic growth and added $2 billion to its share repurchase plan.
Joanne Crevoiserat, CEO of Tapestry, said: “We have always had multiple paths to growth and our decision today clarifies the forward strategy. Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business. Tapestry remains in a position of strength, with distinctive brands, an agile platform, passionate teams, and robust cash flow. We have significant runway ahead and are pleased to announce today an additional shareholder return program, as we believe there is no better investment at this time than our own stock.”
