Luxury Fashion Deal Falls Apart Amid Regulatory Hurdles
The highly anticipated merger between Tapestry, the parent company of Coach and Kate Spade, and Capri, the owner of Michael Kors and Versace, has officially been terminated. The $8.5 billion deal, which would have created a U.S. luxury giant rivaling European powerhouses, has been scrapped due to regulatory concerns.
Competition Fears Prompt FTC Intervention
The U.S. Federal Trade Commission (FTC) had sued to block the deal, citing anti-competition concerns. The agency argued that the merger would eliminate head-to-head competition between the top two handbag makers, giving the combined entity the power to unfairly raise prices.
Uncertain Outcome Prompts Mutual Agreement
After a U.S. judge blocked the deal last month, both companies have agreed to end the merger agreement, citing uncertainty over the outcome of the legal process. The deal deadline was set for February 10, but with the outcome hanging in the balance, Tapestry and Capri have opted to cut their losses.
Tapestry Looks to Future Growth
Despite the setback, Tapestry remains optimistic about its growth prospects. CEO Joanne Crevoiserat emphasized that the company has always had multiple paths to growth and is now free to focus on its forward strategy. The company has also announced a $2 billion share buyback and raised its 2025 profit forecast following strong quarterly results.
Capri Struggles with Sales Decline
In contrast, Capri has reported several straight quarters of sales decline since the deal was announced in August last year. The company’s shares have lost nearly half their value since the deal was blocked, and were down nearly 6% in premarket trading on Thursday. Tapestry, on the other hand, saw its stock rise 6% on the news.
No Acquisitions on the Horizon
Tapestry has ruled out any acquisitions in the near term, choosing instead to focus on its existing brands. The company has also agreed to reimburse Capri’s expenses of about $45 million, incurred in connection with the merger. As the dust settles, both companies will need to regroup and reassess their strategies in the competitive luxury fashion landscape.
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