A pedestrian walks past a Michael Kors store on August 10, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
capri and tapestry The merger was called off Thursday after the Federal Trade Commission successfully sued to block the mega-deal.
According to a press release, the two American luxury brands “agreed” that it is in their best interest to terminate the merger as they are unlikely to receive regulatory approval before the deal is set to expire in February.
“With the termination of the merger agreement, we are now focused on the future of Capri and our three iconic luxury brands,” Capri chief executive Johh Idol said in a statement. on. “Looking ahead, I remain confident in Capri’s long-term growth potential for a number of reasons. “
The $8.5 billion acquisition, initially announced in August 2023, was intended to marry two of the largest luxury brands in the United States and bring six fashion brands under one company: Tapestry’s Coach, Kate Spade and Stuart Weitzman and Capri owns Versace, Jimmy Choo and Michael Kors.
April, FTC sues to block dealsaying such collaboration would put consumers at a disadvantage and reduce the benefits of the company’s employees. Last month, a federal judge ruled in favor of FTC and granted its motion for a preliminary injunction to block the proposed merger.
At the time, Tapestry said it would appeal the ruling.
Tapestry said in a press release issued Thursday that it does not need Capri to continue growing and will use the freed-up cash to fund an additional $2 billion in stock repurchase authorization.
CEO Joanne Crevoiserat said in a statement: “We have always had multiple growth paths, and today’s decision clarifies the strategy moving forward. Building on the success of the first quarter, we will quickly and boldly accelerate the growth of our organic business.
Tapestry plans to fund share repurchases through a combination of cash on hand and debt.
The company said Thursday that “the transaction does not involve a termination fee,” but that under the terms of the merger agreement, Tapestry agreed to pay Capri a fee if the deal failed to receive regulatory approval. Tapestry said it would compensate Capri about $45 million.
Wall Street analysts have recently begun to sour the merger, saying Tapestry was prepared to pay too much for Capri given the lengthy approval process and the extent of Capri’s business decline.
After the judge’s ruling, Capri’s stock price plunged about 50%, while Tapestry’s stock price soared about 10%. Tapestry shares rose about 6% in premarket trading Thursday, while Capri shares fell about 6%.
Capri is scheduled to hold a conference call with analysts at 11 a.m. ET to discuss the decision and its strategy to return to growth and repair its most important brand, Michael Kors, which has been grappling with a prolonged decline in sales.
“Given our company’s performance over the past 18 months, we have recently begun implementing a series of strategic initiatives to return our luxury brands to growth,” Idol said in a press release. “Across Versace, Jimmy Choo and Michael Kors, we have focused on While our strategies are tailored to each brand, our overall goals are similar.
