Tapestry, the parent company of luxury handbag and accessories brand Coach, said late Wednesday it would buy Capri Holdings, the owner of Michael Kors, Versace and Jimmy Choo. CPRI stock soared nearly 56% Thursday. Meanwhile, TPR stock tumbled.
Tapestry, whose brands also include Kate Spade and Stuart Weitzman, said the $8.5 billion deal will create a global fashion powerhouse with six distinctive luxury brands.
The combined companies have a presence in over 75 countries. It generated $12 billion in revenue and nearly $2 billion in adjusted operating profit last fiscal year.
Per terms of the deal, Capri Holdings shareholders will receive $57 per share in cash. The offer represents a 59% premium to CPRI stock's 30-day, volume-weighted average price ending Aug. 9.
"Today's announcement marks a major milestone for Capri," CEO John Idol said in the news release. "It is a testament to all that our teams have achieved in building Versace, Jimmy Choo, and Michael Kors into the iconic and powerful luxury fashion houses they are today."
Tapestry and Capri executives believe the deal will deliver "immediate" value to shareholders. The combination includes more than $200 million in expected cost synergies within three years of closing and will allow the company to invest in the business while paying down debt.
With the announcement, Tapestry hiked its quarterly dividend 17% with an expected payout of $1.40 per share in fiscal 2024.
Fashion Stock Action
CPRI stock soared 55.7% to 53.90 Thursday. The rally puts Capri's decline at 5.9% for the year through Thursday. CPRI stock hit its 2023 peak of 69.25 on Feb. 3 and dived after its earnings miss on Feb. 8.
Capri canceled its Q1 2024 earnings call scheduled for late Thursday but will still release results. The company expects to report earnings and revenue slightly above its previously issued range. Capri does not plan to provide a financial outlook.
TPR stock tumbled 15.9% Thursday and retreated 5.7% before the opening bell. Shares are consolidating, dropping to their fourth test since May of the 200-day moving average.
Tapestry stock declined 8.9% in 2023. The company announces Q4 and fiscal 2023 results on Aug. 17.
