The deal, valued at $8.5bn, was initially agreed in August last year, with Tapestry aiming to acquire Capri, which owns luxury fashion brands such as Versace and Jimmy Choo.
Both parties believe that ending the agreement serves in their best interests as the possibility of receiving necessary US regulatory approval remains unlikely to be secured by the deadline of 10 February 2025.
This development follows a US judge's ruling that blocked the pending merger due to concerns about reducing competition in the luxury handbag market.
“With the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses. Looking ahead, I remain confident in Capri’s long-term growth potential for numerous reasons,” Capri Holdings chairman and chief executive officer John Idol said.
Tapestry's chief executive officer Joanne Crevoiserat added: “We have always had multiple paths to growth and our decision today clarifies the forward strategy. Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business. Tapestry remains in a position of strength, with distinctive brands, an agile platform, passionate teams, and robust cash flow.”
There is no break fee associated with this transaction; however, Tapestry has agreed to reimburse Capri’s expenses incurred during this process amounting to approximately $45m.
Capri has provided an overview of its group strategy for returning to growth, which includes communication, product, omni-channel, wholesale and corporate social responsibility.
The company will focus on engaging and motivating both new and existing customers, develop appealing fashion products that connect with consumers, use digital tools to enhance e-commerce performance and boost retail store sales, stabilise revenue by aligning product offerings with consumer preferences, and strengthen corporate values within communities both internally and externally.
Capri chairman and CEO John Idol stated: “First, we have an incredible portfolio of luxury houses, each with their own rich heritage, exclusive DNA and strong consumer loyalty. Second, we have a solid distribution network to build upon. With over 1,200 directly operated luxury retail locations globally combined with our robust digital platform we have a strong framework for the future.”
“Additionally, our extensive wholesale network serves as an important channel to reach consumers in areas where we do not have our own stores. Third, we have the management team, design talent and a global workforce of 15,000 employees to successfully execute our initiatives. Fourth, we have the financial strength to implement our strategies.”
Capri anticipates reducing its store fleet to about 650 Michael Kors stores over time and renovating around 150 stores over the next two years.
It expects to remain flat store fleet at approximately 230 Versace stores and around 220 Jimmy Choo stores.
In the light of its strong operational performance, Tapestry said it is positioned to return substantial capital to shareholders. It revealed a new additional $2bn share repurchase programme and intends to increase dividends, targeting a payout ratio of 35% to 40%.
Tapestry does not foresee any acquisitions in the immediate future and will ensure the strength of Coach and sustainable growth for Kate Spade before considering any potential acquisitions. It reaffirmed its Fiscal 2025 outlook.
