Luxury fashion giants Capri Holdings and Tapestry have officially called off their planned $8.5 billion merger, citing insurmountable regulatory hurdles after a Federal Trade Commission (FTC) lawsuit blocked the deal.
The companies, known for their high-profile brands, mutually agreed to end the merger following a federal judge’s ruling last month in favor of the FTC, which argued that the merger would reduce competition and harm consumers.
Announced in August 2023, the merger would have brought together Tapestry’s Coach, Kate Spade, and Stuart Weitzman brands with Capri’s Versace, Jimmy Choo, and Michael Kors, creating one of the largest luxury conglomerates in the US market. However, regulatory pushback soon followed. The FTC sued to prevent the merger in April, arguing it would limit consumer choices in the high-end handbag market and reduce benefits for employees. Despite Tapestry’s initial plans to appeal, both companies decided to abandon the merger after determining they would not obtain regulatory approval before the deal’s expiration in February.
In separate statements Thursday, executives at both companies expressed confidence in their independent growth prospects.
“With the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses,” Capri CEO John Idol stated.
He emphasized Capri’s commitment to revitalizing its brands, particularly Michael Kors, which has faced prolonged challenges.
Tapestry CEO Joanne Crevoiserat highlighted that Tapestry will focus on accelerating its organic growth strategy.
“Our decision today clarifies our forward strategy,” Crevoiserat said.
Tapestry also announced an additional $2 billion share repurchase authorization, to be funded by cash reserves and debt, underscoring the company’s confidence in its independent trajectory.
In the wake of the court ruling last month, Capri’s shares plunged nearly 50%, while Tapestry’s stock saw a 10% increase as investors adjusted their expectations. On Thursday, Tapestry shares rose 7% in premarket trading, while Capri’s dropped over 5%. Under the terms of the canceled agreement, Tapestry will reimburse Capri around $45 million for transaction-related expenses, though no break fee applies.
The FTC’s decision reflects an increasing regulatory focus on limiting industry consolidation that could harm consumers. The proposed merger raised concerns among analysts, some of whom had speculated that Tapestry might be overpaying for Capri given the regulatory challenges and the recent downturn in Capri’s business performance. The case is seen as a potential benchmark in antitrust enforcement as similar industry consolidations are considered.
Both Capri and Tapestry have announced plans to sharpen their brand strategies as they move forward independently. Capri’s Idol outlined initiatives for enhancing brand appeal across Versace, Jimmy Choo, and Michael Kors, focusing on digital engagement, product innovation, and an omni-channel approach. Meanwhile, Tapestry plans to leverage its strong first-quarter performance to further its growth across its brand portfolio, positioning itself to thrive without the added leverage of Capri’s luxury lines.
CNBC, Axios, and the Financial Times contributed to this report.
