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Tapestry Scraps $8.5 Billion Merger with Capri Amid Regulatory Hurdles

By  |  November 15, 2024

Fashion giant Tapestry announced on Thursday that it has decided to withdraw from its planned $8.5 billion merger with Capri Holdings, citing the difficulties in overcoming ongoing regulatory challenges within a reasonable timeframe, according to AP News. This decision marks the end of a highly anticipated merger that would have brought together some of the most prominent brands in the luxury and affordable luxury markets.

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    The merger, initially agreed upon in August 2023, aimed to combine Capri Holdings—which owns high-profile brands such as Versace, Jimmy Choo, and Michael Kors—with Tapestry, the parent company of Coach, Kate Spade New York, and Stuart Weitzman. Both companies had hoped to create a powerful luxury fashion conglomerate poised to compete on a global scale.

    However, the deal encountered significant obstacles from the start. In April 2024, the Federal Trade Commission (FTC) filed a lawsuit to block the merger, expressing concerns that the acquisition would reduce competition between the brands in the affordable luxury handbag sector. According to Reuters, the FTC argued that the merger would effectively eliminate direct competition in the marketplace, potentially leading to reduced choices for consumers.

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    Related: Tapestry Pauses Capri Merger Plans Amid Appeal to US Court Decision

    The FTC also voiced concerns over the deal’s potential impact on the labor market. By merging, the two companies would have been less motivated to compete for talent, which the FTC claimed could result in suppressed wages and fewer employment benefits. Combined, the two companies would have employed approximately 33,000 individuals worldwide, amplifying the regulator’s concern about the merger’s potential ripple effect on the fashion industry’s job market.

    These concerns prompted a U.S. District Court judge to halt the merger in October, siding with the FTC’s stance that the deal could hurt consumers by reducing competition. In response, both Tapestry and Capri filed an appeal, hoping to overturn the ruling and push the merger forward. However, Tapestry stated on Thursday that the chances of resolving the legal battle before the February 2025 deadline were “uncertain and unlikely,” leading the company to abandon the merger altogether.

    Following Tapestry’s announcement, Capri’s stock took a 4.6% dip in premarket trading, reflecting investors’ reaction to the dissolution of the merger plans.

    Despite the setback, Tapestry remains optimistic about its future. According to AP News, the New York-based fashion house highlighted a “successful” first quarter and announced plans to focus on growing its existing brands.

    Source: AP News