In a significant move in the luxury fashion industry, Tapestry, the parent company of Coach, has announced its acquisition of the owner of Michael Kors in a deal valued at $8.5 billion.
The acquisition terms state that Tapestry will pay $57 per share in cash, which is a premium of nearly 65%. At the time of the announcement, Capri’s shares were trading at $51.83 in premarket trading. This move highlights the ongoing efforts of U.S. luxury brands to catch up with their European counterparts, such as the renowned LVMH Louis Vuitton Dior.
This strategic deal will bring together Tapestry’s existing brands, including Kate Spade, with Capri’s notable brands like Jimmy Choo and Versace. The merger is expected to strengthen the companies’ position in the U.S. retail sector, which is currently grappling with challenges like reduced domestic demand due to inflation and an inconsistent recovery in crucial markets like China.
The weakened demand has been a concern for both Tapestry and Capri. To counteract this, both companies have been eyeing international markets to fuel growth. “There is more security in embarking on bold international plans as a larger entity,” commented GlobalData Managing Director, Neil Saunders.
Looking back, in 2017, Tapestry, then operating as Coach Inc, acquired handbag manufacturer Kate Spade in a deal worth $2.4 billion. In the same year, Capri, previously known as Michael Kors, purchased British shoemaker Jimmy Choo for $1.2 billion. Following this, in 2018, Capri acquired Versace for $2.2 billion.
This recent acquisition of Capri by Tapestry might signal a resurgence in U.S. luxury sector deals, especially when European giants have been actively acquiring high-end brands. Just last month, the French luxury group Kering, known for brands like Gucci, showed interest in Valentino.