Coach parent Tapestry (TPR.N) will buy Versace and Michael Kors owner Capri Holdings (CPRI.N) in a deal valued at $8.5 billion, creating a U.S. fashion powerhouse to challenge larger European rivals for a bigger share of the global luxury market. U.S. luxury firms have consistently lagged their European peers in scale, limiting their ability to compete better. Paris-listed LVMH (LVMH.PA) owns 75 brands, including U.S. jeweler Tiffany and fashion labels Louis Vuitton and Dior. Thursday’s deal will also bring under one roof Tapestry’s more affordable luxury brands Kate Spade, Stuart Weitzman and Capri’s Jimmy Choo and Versace labels. “Scale appears to be more and more important in luxury given the resources big conglomerates can put into growing their smaller brands,” Morningstar analyst Jelena Sokolova said. The combined company generated more than $12 billion in global annual sales in the previous fiscal year, Tapestry said. That compares with about $87 billion for LVMH last year and roughly $23 billion for another European rival Kering (PRTP.PA). The Associated Press has the story:
Parent of Coach will buy Versace owner Capri in $8.5B deal
Newslooks- NEW YORK (AP)
Tapestry, the parent company of luxury handbag and accessories retailer Coach, is buying the owner of fashion brands including Michael Kors, Versace and Jimmy Choo, Capri Holdings. Big fashion has been getting even bigger through a spate of acquisitions as U.S. players seek more sway in Europe. The approximately $8.5 billion (7.7 billion euro) deal puts Tapestry in a better position to do just that in going-to-toe with rivals like LVMH (LVMH.PA) and Kering.
Tapestry Inc., whose brands also include Kate Spade and Stuart Weitzman, said Thursday that the combined company had global annual sales of more than $12 billion (10.9 billion euro) and has a presence in more than 75 countries. Tapestry has a market cap of nearly $10 billion (9.1 billion euro), while Capri’s is around $4 billion (3.6 billion euro).
Once completed, the new entity will be the fourth largest luxury company in the world, with a combined market share of around 5.1% of the luxury goods market, according to research firm GlobalData PLC. In the Americas, the company will become the second largest luxury player behind LVMH, with a combined share of 6% of the luxury goods market, GlobalData said.
“The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house,” Tapestry CEO Joanne Crevoiserat said in a prepared statement.
Capri Holdings Ltd. shareholders will receive $57.00 (51.9 euro) per share in cash.
“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,” Capri Chairman and CEO John Idol said.
French luxury conglomerate Kering reached a deal in July to buy a 30% stake in Italian fashion house Valentino for 1.7 billion euros from Qatari investment firm Mayhoola. Under the agreement, Kering, which owns Gucci, has the option to buy 100% of Valentino no later than 2028.
Coach owner Tapestry has worked to create its own house of brands to rival the European luxury conglomerates.
Kering had also tried to snap up Tom Ford, but beauty company Estee Lauder wound up reaching a deal with the luxury goods maker.
LVMH, meanwhile, purchased famed jewelry company Tiffany in 2021 after a back-and-forth between the two companies over the agreement.
Buying Capri is a strategic move for Tapestry on many levels.
Neil Saunders, managing director of GlobalData, said the acquisition will “create an American fashion giant that, while not quite as prestigious or large as its European counterparts, would wield a significant influence in the luxury market.”
“Luxury is facing something of a slowdown, especially in the North American market where consumers, even at the higher income end of the market, are starting to curtail spending,” Saunders said. “This has put pressure on Tapestry and Capri, both of which are now looking to international markets to bolster growth.”
Versace parent Capri had a market value of $4 billion as of Wednesday and its shares surged in pre-market trading.
The boards of Tapestry and Capri have approved the deal, which is expected to close next year. It still needs approval from Capri shareholders.
Capri’s stock jumped 56%, or $19.35 to $53.96 in early morning trading on Thursday, while shares of Tapestry fell almost 12%, or $4.87, to $36.38.
