Tapestry-Capri: US court blocks merger

A US federal judge has blocked the acquisition of Capri Holdings, which owns the Michael Kors, Versace and Jimmy Choo brands, by Tapestry, the group that owns Coach and Kate Spade. The $8.5 billion deal, announced in August 2023 and already approved in Europe, would weaken competition, according to the Manhattan federal court ruling. The two groups, in fact, would both position themselves in the "accessible luxury" segment (in which the two flagship brands Coach and Micheal Kors fall, ed.) concentrating 59% of this market segment in a single conglomerate: in the 169-page judgement, Judge Jennifer Rochon wrote that "the two merging players are close competitors and the transaction would result in a loss of direct competition".

The decision comes at the end of proceedings triggered by the Federal Trade Commission (FTC), the American competition authority that had taken legal action to prevent this merger, which was destined to create a fashion giant. And it comes as a bit of a cold shower for both the players involved and several analysts who had 'bet' on a favourable ruling on the merger. As, probably, did the market: according to Bloomberg, the shares of the Capri group had risen from $35 to $42, approaching the value of Tapestry's shares ($57 at the time). After the ruling, they fell 47 per cent in pre-market trading. Tapestry's shares, on the other hand, rose 15 per cent.

Coach's company, meanwhile, has announced that it will appeal: 'The decision is incorrect from a legal and factual point of view,' it wrote in a note. The transaction freeze also directly affects an Italian fashion house: Versace, which was taken over by the Capri group in 2018. The company founded by Gianni Versace and led, creatively, by Donatella Versace, has long been at the centre of sale rumours that have also involved the Agnelli-Elkann family's Exor holding company. In the first quarter of fiscal year 2025 (ending 29 June 2024), the Versace maison posted more negative figures than the group, which posted a -13.2% drop in sales at current exchange rates: Medusa posted revenues of €219 million, down 15.4% at current exchange rates and 14.3% at constant exchange rates, with a particularly sharp drop in the wholesale channel and in revenues in Europe (-22%). Profitability figures were also negative: $17 million operating loss, operating margin -7.8%.