Tapestry to appeal ruling to block its merger with Capri
Last year Tapestry announced it would acquire rival American fashion conglomerate Capri in a deal valued at £6.6 billion ($8.5 billion). Fast forward to 2024, a federal judge has blocked Tapestry’s acquisition of Capri, following a trial held last month in New York.
In August 2023, Tapestry, the owner of Coach and Kate Spade, made fashion headlines after purchasing Capri Holdings, owner of Michael Kors and Versace. This deal would marry America’s two largest luxury houses.
However, Judge Jennifer Rochon granted the Federal Trade Commission’s (FTC) motion for a preliminary injunction to block the proposed merger.
According to the FTC, if the merger went ahead, it would negatively affect consumers by making the affordable handbag market less accessible.
The FTC claimed that the merger would take away the “benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing, and advertising.” Not only was it concerned with the consumer, but also the 30,000 employees impacted by the merger.
Tapestry fired back, arguing the deal is “pro-consumer” because it would allow them to keep up with trends faster, offering better products to more consumers, adding it had plans to appeal the ruling.
In a statement, Tapestry said: “Today’s decision granting the FTC’s request for a preliminary injunction is disappointing and, we believe, incorrect on the law and the facts. Tapestry and Capri operate in an industry that is intensely competitive and dynamic, constantly expanding, and highly fragmented among both established players and new entrants.
“We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer.”
According to a securities filing, under the terms of the merger agreement, Tapestry would reimburse Capri for expenses incurred as part of the transaction if it failed to be approved.
If either party walks away from the deal because it didn’t receive regulatory approval, Tapestry agreed to pay Capri between $30-$50 million. However, Capri agreed to pay a breakup fee of $240 million if it decides to terminate the proposed merger.
