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An American fashion mega deal is in the works. Tapestry, the parent company of Coach, Kate Spade and Stuart Weitzman, will acquire rival group Capri Holdings, which owns Michael Kors, Jimmy Choo and Versace for $8.5 billion, the companies announced today.
The merger, which is expected to close in 2024 subject to approval by regulators and Capri’s shareholders, will create an American fashion conglomerate with combined annual revenues of over $12 billion. The transaction is not subject to any financial conditions as Tapestry secured $8 billion from the Bank of America and Morgan Stanley.
“We are ready to leverage our competitive advantages across a broader portfolio of brands,” said Tapestry CEO Joanne Crevoiserat in a statement. “The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world.”
Capri, which has a market cap of just over $4 billion, reported revenues of $5.62 billion in fiscal 2023, down 0.7 per cent on the previous year’s record $5.65 billion. Tapestry’s market cap is nearly $10 billion and it made $6.68 billion in revenues in 2022, up 16 per cent year-on-year. Tapestry will report its fiscal 2023 and fourth quarter results on 17 August.
A merger will strengthen the two companies, which took a big hit during Covid from the disruptions in China, which had an impact on both manufacturing capabilities and consumer spending. The companies are also exposed to the squeeze on aspirational luxury spending in the US, amid soaring inflation. Tapestry grew revenues 5 per cent in the quarter ended 1 April 2023, thanks to a rebound in China, but Capri’s revenues decreased 10.5 per cent in the same period, which it put down to the uncertainties in its domestic market.
The vision for the merger is to build the global reach and geographic diversification for both companies, particularly in Europe and Asia; broaden product offering and increase penetration of lifestyle categories; and snag up a larger segment of the market with diversified cash flow. The companies said within three years of closing the deal, they expect to save over $200 million in cost synergies due to greater supply chain efficiencies and operating cost savings.
“We are confident this combination will deliver immediate value to our shareholders,” said Capri Holdings CEO John Idol in a statement. “It will also provide new opportunities for our dedicated employees around the world as Capri becomes part of a larger and more diversified company. By joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands.”
The two companies’ combined weight will still pale in comparison to LVMH and Kering, which have market caps of $405.15 billion and $64.14 billion, respectively, according to Bloomberg. Kering is also on the acquisition trail: in July, the Gucci owner said it has agreed to acquire a 30 per cent stake in Valentino for €1.7 billion from Qatari investment fund Mayhoola (which also owns Balmain), with the option for the group to acquire 100 per cent of the share capital by no later than 2028. OTB Group, the owner of Diesel, Maison Margiela and Marni — which reported net sales of €1.63 billion in 2022 — has also been acquiring brands with a view to creating an alternative luxury conglomerate.
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