NEPTUNE, NJ – Nearly every outlet shopping center in New Jersey features two brands, Coach and Michael Kors. Now, these two giants are being combined into one luxury super brand and business which could be a good thing for New Jersey shoppers.
Tapestry, the parent company of Coach, will be acquiring Capri Holdings, the owner of Michael Kors, in a transaction valued at $8.5 billion. This move aims to create a prominent American fashion conglomerate that can more effectively compete with larger European counterparts in the global luxury market.
Under the terms of the deal, Tapestry will offer Capri shareholders $57 per share in cash, totaling around $6.69 billion. This price represents a premium of nearly 65% over Capri’s pre-deal share price of $54.90. Tapestry’s own shares experienced a 2% decline.
This acquisition will bring together Tapestry’s portfolio, which includes brands like Kate Spade and Stuart Weitzman, with Capri’s labels, including Jimmy Choo and Versace.
American luxury companies have historically trailed their European counterparts such as LVMH, which owns renowned brands such as Tiffany, Louis Vuitton, and Dior.
This purchase also acts as a safeguard against an anticipated slowdown in luxury goods demand in the U.S., following a surge in spending after the pandemic. Elevated inflation has prompted consumers to curtail discretionary expenses.
Neil Saunders, Managing Director of GlobalData, noted that both Tapestry and Capri are focusing on international markets to drive growth due to weakening domestic demand. The consolidation of the two companies could provide more stability in pursuing these international expansion plans.
Capri’s CEO, John Idol, stated that the merger would furnish them with enhanced resources and capabilities to expedite their global expansion efforts.
Both Tapestry and Capri have previously expanded through acquisitions. In 2017, Tapestry (then Coach Inc) acquired Kate Spade for $2.4 billion, while Capri (formerly Michael Kors) bought Jimmy Choo for $1.2 billion. In the subsequent year, Capri acquired Versace for $2.2 billion.
This acquisition of Capri might signal a resurgence of deal-making in the U.S. luxury sector, contrasting with European giants that have been acquiring prestigious brands. Last month, French luxury group Kering announced its purchase of a 30% stake in Italian fashion label Valentino, while LVMH completed its $15.8 billion acquisition of Tiffany in early 2021.
Initial reports about the potential merger between Capri and Tapestry were first disclosed by The Wall Street Journal on Wednesday.