Tapestry, a prominent fashion company, announced on Thursday its decision to abandon the planned merger with Capri due to the anticipated difficulties in overcoming an antitrust hurdle within a reasonable timeframe.
The proposed merger, valued at $8.5 billion, was initially agreed upon in August 2023 and aimed to combine Capri, renowned for its brands such as Versace, Jimmy Choo, and Michael Kors, with Tapestry, which boasts brands like Coach, Kate Spade New York, and Stuart Weitzman.
However, the deal encountered significant challenges. The Federal Trade Commission (FTC) took legal action in April to block the merger, arguing that it would diminish direct competition between the brands associated with both companies in the affordable luxury handbag sector.
Furthermore, the FTC raised concerns that the merger could reduce the competitive drive for talent between the two companies, potentially resulting in lower wages and diminished workplace perks. According to the FTC, the merged entity would have employed approximately 33,000 individuals globally.
In addition, a U.S. District judge ruled last month that the merger could lead to a decrease in competition and ultimately harm consumers, further complicating the merger’s future.
Tapestry and Capri had filed a joint notice to appeal the judge’s decision, but on Thursday, Tapestry expressed doubt about the resolution of the legal proceedings, stating it is “uncertain and unlikely to be resolved by the February 10, 2025 outside date.”
As a result of this news, Capri’s shares dropped by 4.6% in premarket trading. On the other hand, Tapestry have characterized its first quarter as “successful” and announced plans to boost growth in its organic business. In this context, Tapestry’s board has authorized a stock buyback initiative of up to $2 billion, leading to a 6.3% increase in Tapestry’s stock prices.
