A pedestrian walks past a Michael Kors store on August 10, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
capri and tapestry The Federal Trade Commission halted the merger on Thursday after a successful lawsuit seeking to block the giant deal.
The two U.S.-based luxury brands said in a news release that it was in their “mutual interest” to call off the merger because it was unlikely they would receive regulatory approval before the deal expires in February. It is said that they have agreed.
“With the termination of the merger agreement, we are focused on the future of Capri and our three iconic luxury brands,” Capri CEO John Idle said in a statement. “Looking to the future, I remain confident in Capri’s long-term growth potential for a number of reasons.”
The $8.5 billion acquisition, originally announced in August 2023, will partner with two of America’s biggest luxury brands, including Tapestry’s Coach, Kate Spade, Stuart Weitzman and Capri’s Versace, Jimmy Choo and Michael Kors. The plan was to bring six fashion brands under one company.
The FTC filed a lawsuit in April seeking to block the deal, arguing that the partnership would harm consumers and reduce benefits for company employees. Last month, a federal judge ruled in favor of the FTC, granting a motion for a preliminary injunction blocking the proposed merger.
At the time, Tapestry said it would appeal the ruling.
Tapestry said in its news release Thursday that it doesn’t need Capri to continue growing and will use the free cash to fund an additional $2 billion in share buyback authorizations.
“We have always had multiple paths to growth, and today’s decision provides clarity on our future strategy,” Chief Executive Officer Joan Crevoissera said in a statement. We will accelerate the growth of our organic business with boldness and boldness.”
Tapestry plans to use a combination of cash on hand and borrowings to fund the share buyback.
The company said Thursday that “there are no penalties associated with this transaction,” but under the terms of the merger agreement, Tapestry agrees to pay costs to Capri if the deal does not receive regulatory approval. was. Tapestry announced it would pay approximately $45 million in compensation to the Isle of Capri.
Jimmy Choo, Michael Kors and Versace store opens on Rodeo Drive in Beverly Hills, California, USA on Thursday, April 18, 2024.
Eric Thayer | Bloomberg | Getty Images
Wall Street analysts had recently begun to balk at the merger, saying Tapestry was prepared to overpay for Capri given the lengthy approval process and Capri’s declining performance.
Immediately after the judge’s ruling, Capri’s stock price fell by about 50%, while Tapestry’s stock price rose by about 10%. On Thursday, Tapestry stock rose more than 7% in premarket trading, while Capri stock fell about 5% or more.
Capri held a call with analysts at 11 a.m. ET to discuss the decision and its strategy to put Michael Kors, its most important brand, back on track for growth after a long period of declining sales. We are planning to talk.
“Given our performance over the past 18 months, we have recently begun implementing a number of strategic initiatives to return Luxury Homes to a growth trajectory,” Idle said in a news release. “Across Versace, Jimmy Choo and Michael Kors, we are focused on brand favorability through exciting communications, engaging products and an omnichannel consumer experience. Although uniquely tailored, our overarching goals are similar.”
Correction: John Idle is the CEO of Capri. A previous version misspelled his name.
