Tapestry’s attempt to acquire Capri is officially dead.
Tapestry, which owns Coach, Kate Spade and Stuart Weitzman, announced its intention to acquire Capri, the owner of brands like Michael Kors, Versace and Jimmy Choo, in August of last year. But a legal challenge from the FTC, led by chair Lina Khan, put up barriers to the acquisition. This month, the acquisition was officially blocked according to a court ruling, and on Thursday, Tapestry formally announced the termination of the deal.
Announced alongside the end of the deal is a $2 billion share repurchase program financed by a combination of cash on hand and future debt.
The deal was Tapestry’s attempt to grow through acquisition, giving it a further foothold in the accessible luxury accessories category where Coach and Kate Spade have strength. But the same thing that made the deal attractive to Tapestry also raised the concern of regulators, who determined that a Tapestry-Capri merger would consolidate too much of the accessible luxury market under one roof.
Now Tapestry will have to rely on other avenues for growth.
“We have always had multiple paths to growth and our decision today clarifies the forward strategy,” Tapestry CEO Joanne Crevoiserat said in a statement. “Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business. Tapestry remains in a position of strength, with distinctive brands, an agile platform, passionate teams and robust cash flow.”
Brian Yarbrough, an analyst at Edward Jones who covers Tapestry, told Glossy that Tapestry is “lucky that the deal was blocked,” since he considered it an unwise move from the beginning.
“In retail acquisition, the successes are few,” Yarbrough said. “Coach is doing well, but Kate Spade and Stuart Weitzman are not. So you’ve got one out of three brands doing well, and then you’re going to buy a company with three brands that are struggling. So you’ll have five out of six brands struggling and only one doing well? It makes no sense.”
Yarbrough said even mergers between two companies that are both doing well independently can be disastrous. Adding more brands would detract from Tapestry’s ability to focus on its brands that are doing well. In his opinion, Tapestry should sell Stuart Weitzman and focus more narrowly on Coach’s continued success and Kate Spade’s turnaround.
The end of the Tapestry-Capri saga is also a notable win for Lina Khan, the FTC chair who has been far more proactive about pursuing large-scale mergers than previous FTC heads. During her tenure, she pursued cases against acquisitions by big companies like Nvidia, Microsoft, Lockheed Martin and Meta.
The FTC’s success in this case may well be her swan song, however, as President-elect Donald Trump is almost certainly going to replace her with a new appointee who is friendlier to big business. And the precedent set by the blocking of the Tapestry deal may not survive a Trump term, Yarbrough said.
“We certainly expect a more normalized M&A environment under the next administration,” Yarbrough said. “The Tapestry-Capri deal would have consolidated many of these handbag brands in one space, so it may have been blocked even under a Trump administration. But M&A will heat up in the next regime.”
