Versace Parent Capri Stock Tumbles as Judge Blocks Merger With Coach Owner

KEY TAKEAWAYS

• Capri Holdings shares plummeted 45% soon after the market opened Friday after a federal judge blocked Coach owner Tapestry’s $8.5 billion acquisition of the Versace and Michael Kors parent.
• Shares of Tapestry, which also owns the Kate Spade and Stuart Weitzman brands, are surging 15%.
• Southern District of New York judge Jennifer Rochon granted the FTC’s motion for a preliminary injunction to block the proposed merger on the grounds that a combination would hurt competition and lead to higher prices.
• Both Capri and Tapestry say they plan to appeal.

Capri Holdings (CPRI) shares plummeted 45% soon after the market opened Friday after a federal judge blocked Coach owner Tapestry’s (TPR) $8.5 billion acquisition of the Versace and Michael Kors parent.

Shares of Tapestry, which also owns the Kate Spade and Stuart Weitzman brands, surged 10% after the ruling, which sided with antitrust regulators in arguing that the combination would hurt competition and lead to higher prices.

The luxury brands announced the deal last year but the Federal Trade Commission (FTC) sued to block their merger, saying the combined firm would have too much power and reduce competition in the market for accessible luxury handbags.

On Thursday, Southern District of New York judge Jennifer Rochon granted the FTC’s motion for a preliminary injunction to block the proposed merger in a 169-page ruling.

Capri and Tapestry Plan To Appeal Ruling

Both Capri and Tapestry said they would appeal.

“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,” Tapestry said. “We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer.”

Henry Liu, director of the FTC’s Bureau of Competition, called the ruling “a victory not only for the FTC, but also for consumers across the country seeking access to quality handbags at affordable prices.”

“These bags are a product which millions of people rely on throughout their daily lives,” he added. “The decision will ensure that Tapestry and Capri continue to engage in head-to-head competition to the benefit of the American public.”

The companies combined to have more than $12 billion in annual sales in fiscal 2023, but that’s still a fraction of those reported by European luxury rivals like LVMH, which notched 86.2 billion euros ($93.3 billion) in sales last year.

Including Friday’s moves, Tapestry shares have added 34% this year, while those of Capri have dropped 55%.

UPDATE—Oct. 25, 2024: This article has been updated to include comments from the FTC and to reflect more recent share prices. 

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