Tapestry, the owner of brands including Coach and Kate Spade, agreed to acquire Michael Kors parent Capri in an $8.5 billion (€7.7 billion) deal that shows the wave of consolidation in the luxury-goods sector is far from finished.
Tapestry and Capri separately built up their own stables of high-end brands in recent years, but they’ve been no match for the breadth and depth of European luxury houses LVMH and Kering. The continental giants own brands that touch on an array of sectors, including apparel, ready-to-wear, jewellery, watches and alcohol.
The Capri acquisition is an attempt to try to compete more effectively against luxury’s top players, particularly in handbags – strengths for both Coach and Michael Kors – and shoes. Tapestry owns the Stuart Weitzman footwear brand and Capri owns Jimmy Choo.
“By joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach,” Capri chief executive John Idol said in the statement.
New York-based Tapestry is paying $57 a share in cash, according to a statement on Thursday, a 65 per cent premium over Capri’s last closing price. The transaction is expected to close in 2024, subject to approval by regulators and Capri shareholders.
Capri shares surged as much as 58 per cent in New York trading, their biggest leap in the company’s nearly 12 years on the market. Tapestry shares fell as much as 10 per cent.
“Tapestry has made a good acquisition, paying a price that is in line with what we believed Capri was worth,” Citi analyst Paul Lejuez wrote in a research note.
The combination of the six brands “creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for” customers, employees and shareholders, Tapestry chief executive Joanne Crevoiserat said in the statement.
The combined businesses will be the fourth-largest luxury company in the world with a market share of about 5.1 per cent, according to GlobalData analyst Neil Saunders.
The unified company is likely to dominate the US handbag market. “The addition of Michael Kors cements Tapestry as the No. 1 player in the accessible luxury handbag market in the US by a wide margin,” Wells Fargo analyst Ike Boruchow wrote in a research note.
By adding Versace to its brands, the acquisition gives Tapestry its first direct access to a European luxury marque. Capri bought Versace in 2018 and has focused on increasing the brand’s sale of handbags and other accessories, successfully boosting revenue.
Luxury giants have been snapping up smaller brands even as inflation has potentially darkened the outlook for discretionary spending. Cosmetics firm Estée Lauder Cos took over Tom Ford in a $2.8 billion deal announced last year and completed in April. Kering, which had held talks to buy Tom Ford before it was sold to Estée Lauder, agreed a deal last month for a 30 per cent stake in fashion house Valentino for about $1.9 billion. Kering also agreed in June to acquire perfume maker Creed at an undisclosed valuation. – Bloomberg
