Tapestry and Capri call off $8.5 billion merger amid legal hurdles
A deal that would have created a U.S.-based luxury giant has been given its final blow.
Tapestry and Capri Holdings have “mutually agreed” to call off their merger in the face of regulatory challenges. The companies said that terminating the merger agreement was in both their interests as they unlikely to get the necessary U.S. regulatory approvals by Feb. 10, when the deal was set to expire.
In August 2023, Tapestry, parent company of Coach, Kate Spade and Stuart Weitzman, said it would acquire Capri, whose portfolio includes Versace, Michael Kors and Jimmy Choo, in a deal valued at approximately $8.5 billion. Industry experts said the deal would help both companies better compete against their European rivals, particularly LVMH, whose 75 brands include Tiffany, Fendi, Louis Vuitton and Dior.
In April 2024, the Federal Trade Commission (FTC) sued to block the deal. It argued the merger would harm consumers by making the affordable handbag market less accessible and would also deal a blow to employees with worse salaries and benefits. In October, a federal judge in the Southern District of New York granted a preliminary injunction that prevented the deal from moving forward while the FTC investigates the deal in its administrative court. At the time, Tapestry said it planned to appeal the ruling.
“We have always had multiple paths to growth and our decision today clarifies the forward strategy,” Joanne Crevoiserat, Tapestry CEO said in a release Thursday announcing the termination of the deal. “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.”
Tapestry also announced a $2 billion share repurchase authorization, including a planned accelerated share repurchase program.
“Today’s additional $2 billion share repurchase authorization highlights the strength and flexibility of our balance sheet to unlock incremental value, while maintaining our firm commitment to a solid investment grade rating,” said Tapestry CFO and COO Scott Ro.
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Under the terms of the merger agreement, Tapestry had agreed to pay Capri for its expenses if the deal failed to earn regulatory approval. Tapestry said it will reimburse Capri around $45 million.
The decision to call off the merger comes as Capri's most important brand, Michael Kors, continues to struggle with declining sales. In a release, company chairman and CEO John D. Idol said the company was now focusing on "the future of Capri and our three iconic luxury houses.”
“Given our company’s performance over the past 18 months, we have recently started to implement a number of strategic initiatives to return our luxury houses to growth,” Idol said. “Across Versace, Jimmy Choo and Michael Kors, we are focused on brand desirability through exciting communication, compelling product and omni-channel consumer experience. While our strategies are tailored uniquely for each brand, our overarching goals are similar.”
With regard to Michael Kors, Capri plans to close about 155 stores, which would reduce its said it store fleet to approximately 650 stores “over time.” It also plans to renovate approximately 150 stores.
