Tapestry and Capri scrap planned merger amid competition concerns

(Sharecast News) - Fashion giants Tapestry and Capri have scrapped their planned $8.5bn merger on the back of legal uncertainty after US regulators argued that the tie-up would eliminate head-to-head competition in the luxury accessories market. Tapestry, which owns Coach, Kate Spade, and Stuart Weitzman, first announced the merger with Versace, Jimmy Choo and Michael Kors owner Capri back in August 2023, with the deal originally scheduled to complete by the end of this year.

But the US Federal Trade Commission raised concerns in April that the combination of the leading brands would unfairly affect consumers, giving the proposed new parent company the ability to raise prices amid little competition. The concerns lead to a trial in September, after which the merger was blocked.

In a statement on Thursday, Capri and Tapestry said they had "mutually agreed that terminating the merger agreement at this time is in the best interest of both companies, as the outcome of the legal process is uncertain and unlikely to be resolved by the February 10, 2025 outside date".

The companies said that the required closing condition of receiving regulatory approvals was unlikely before the February deadline.

To appease shareholders, Tapestry announced the launch of an additional $2bn share buyback programme, saying that its "steadfast commitment to deliver meaningful shareholder value is unchanged".

"We are confident in our compelling long-term organic growth agenda and the opportunity to deliver enhanced value to all stakeholders for years to come," said chief financial officer and chief operating officer Scott Roe.

Meanwhile, Capri gave shareholders a strategic update, detailing a number of initiatives to bring in new customers, reinvigorate product lines and grow ecommerce sales, among other measures.

"Given our company's performance over the past 18 months, we have recently started to implement a number of strategic initiatives to return our luxury houses to growth," said Capri chairman and chief executive John Idol.

Futures were showing Capri's share price down 6% at $18.51 in pre-market trading, while Tapestry was surging more than 8% to $55.51.