Tapestry has officially terminated its proposed acquisition of Capri, the parent company of Michael Kors and Versace, due to uncertainty surrounding regulatory approvals, as noted by the companies in separate statements on Thursday. This decision comes as the luxury fashion giants agreed that the necessary condition for receiving regulatory clearance was unlikely to be fulfilled before the transaction's deadline of February 10. Following the announcement, Tapestry’s shares saw a significant increase, jumping 12% during Thursday's trading session, while Capri experienced a decline of 3.2%. Tapestry stated, "Capri and Tapestry mutually agreed that terminating the merger agreement at this time is in the best interest of both companies." The initial agreement dates back to August 2023 when Tapestry, recognized for brands like Coach and Kate Spade, expressed intent to acquire Capri in a deal valued at $8.5 billion.
The goal was to create a unified global luxury and fashion brand with expectations to finalize the deal in 2024, pending regulatory approval. Significantly, last month, the US District Court for the Southern District of New York approved the Federal Trade Commission's (FTC) request for a preliminary injunction against the acquisition, citing concerns it could stifle competition in the market for 'accessible luxury' handbags and unjustly inflate prices.
The FTC had filed its administrative complaint and commenced legal proceedings against the merger back in April. Tapestry's CEO Joanne Crevoiserat remarked on the strategic clarity of this decision, saying, "We have always had multiple paths to growth and our decision today clarifies the forward strategy.
Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business." Tapestry also reiterated its outlook for fiscal 2025, anticipating adjusted earnings in the range of $4.50 to $4.55 per share. Revenue is expected to see a growth of approximately 1% to 2% compared to the previous year on both a reported and constant-currency basis, potentially exceeding $6.75 billion.
Current projections from Capital IQ suggest normalized EPS of $4.57 and revenue of $6.76 billion. In addition, Tapestry’s board has given the green light for a new $2 billion share repurchase program. The company is set to redeem $6.1 billion in senior notes related to the aborted Capri acquisition and plans to reimburse transaction costs estimated at around $45 million. Looking ahead, Capri's CEO John Idol communicated optimism about the brand's future, stating, "With the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses.
Looking ahead, I remain confident in Capri's long-term growth potential for numerous reasons.".