A person rides a bicycle past a Gianni Versace store in Beijing, China.
Nelson Ching | Bloomberg | Getty Images
Tapestry, the style conglomerate behind Coach and Kate Spade, will acquire competitor Capri Holdings in a $8.5 billion deal announced on Thursday.
The deal will create an American fashion giant that — while still not quite as large as its European competitors — can be higher positioned to compete in the posh market.
It brings together six fashion brands: Tapestry’s Coach, Kate Spade and Stuart Weitzman and Capri’s Versace, Jimmy Choo and Michael Kors.
Together, the corporate may have the scale and scale to achieve more customers across the globe and higher compete in the posh market, Tapestry CEO Joanne Crevoiserat said on a call Thursday morning. She said the mix pulls together “six iconic brands” which have a presence in over 75 countries and drive over $12 billion in annual revenue.
Shares of Capri surged 58% in premarket trading to just below the per-share deal price, while shares of Tapestry fell roughly 6%.
The deal comes as Tapestry and Capri have seen weaker business in North America. In quarterly reports in May, each firms spoke about American consumers becoming more cautious around spending.
Capri, particularly, has been hit by slowing sales. Its shares hit a 52-week low in late May because it cut its forecast. On an earnings call, the corporate said it saw weaker sales not only of Michael Kors, but additionally of its luxury brands Versace and Jimmy Choo, particularly at department shops. The corporate’s CEO John Idol said on the time that the corporate expected that softness to proceed through the summer.
Tapestry, meanwhile, raised its full-year outlook in its most recently reported quarter.
Tapestry has pushed to raise its brands and appeal to a recent generation of shoppers. At Coach, for instance, it has collaborated with popular brands and celebrities like Disney and Kirsten Dunst and debuted handbags which have resonated with Gen Z customers who discover items on TikTok.
Coach also narrowed the variety of items it carries to the deal with best-sellers, keeping price points high by reducing markdowns. It’s began to run an analogous playbook with Kate Spade.
Tapestry has also looked other parts of the world to drive growth, akin to chasing higher sales in China.
“We have created a dynamic, data-driven consumer engagement platform that has fueled our success, fostering innovation, agility, and robust financial results,” Crevoiserat said in a press release. “From this position of strength, we’re able to leverage our competitive benefits across a broader portfolio of brands.”
Capri CEO Idol said the deal will give the corporate “greater resources and capabilities” to expand its global reach.
“We’re confident this mix will deliver immediate value to our shareholders. It would also provide recent opportunities for our dedicated employees around the globe as Capri becomes part of a bigger and more diversified company,” said Idol.
The boards of each firms have unanimously approved the acquisition and shareholders will receive $57 per share, a 59% premium on the 30-day volume average of Capri’s value.
The deal will not be subject to any financing conditions. It would be funded with bridge financing from Bank of America and Morgan Stanley in a mix of senior notes, term loans and money, a portion of which can be used to pay a few of Capri’s outstanding debt, the businesses said.