- M&A
- April 23, 2024
- 4 minutes read
U.S. FTC Sues To Block $8.5B Fashion Merger
The United States Federal Trade Commission (FTC) has filed a lawsuit to block Tapestry Inc’s $8.5bn deal to buy rival…
The United States Federal Trade Commission (FTC) has filed a lawsuit to block Tapestry Inc’s $8.5bn deal to buy rival Capri Holdings.
- Tapestry (NYSE: TPR) is a New York-based luxury fashion holding company that owns the Coach, Kate Spade, and Stuart Weitzman brands.
- Capri Holdings (NYSE: CPRI) is the parent company of luxury fashion brands Michael Kors, Jimmy Choo, and Versace.
In August 2023, Tapestry struck a deal to acquire Capri Holdings for $8.5bn in cash. The deal was slated to merge two heavyweights in the American luxury fashion industry and put six prestigious brands under a single company. The FTC has sued to block it, asserting that the merger would give Tapestry a dominant position in the “accessible luxury” handbag market and limit competition to customers’ detriment.
The FTC also claims the merger would eliminate incentives for the two luxury fashion giants to compete for employees and could affect employees’ wages and benefits. A combined Tapestry-Capri would have 33,000 staff worldwide.
Tapestry has expanded lately via acquisitions. The company primarily owned the Coach brand for a long time before acquiring Stuart Weitzman in 2015 and Kate Spade in 2017. In 2017, it rebranded from Coach Inc. to Tapestry Inc., reflecting its new focus as a fashion holding company. The deal to buy Capri would have continued Tapestry’s serial acquisition strategy, but the U.S. FTC wants to stop it. “Documents produced by Tapestry indicate that it has no plans to stop acquisitions even after this proposed merger,” the FTC said in its complaint.
Tapestry has pushed back against the FTC’s claims, calling its Capri deal “pro-competitive, pro-consumer” in a press statement. “The FTC fundamentally misunderstands both the marketplace and the way in which consumers shop. Tapestry and Capri operate in an intensely competitive and highly fragmented industry alongside hundreds of rival brands, including both established players and new entrants,” the company said.
- Both parties will have their day in court, and the final ruling lies in the hands of a judge. The FTC has become more active under the Biden administration, suing to thwart acquisitions it considers anti-competitive. Recently, the agency lost its bid to block Microsoft’s $69bn Activision purchase. However, it recently prevailed in a lawsuit to reverse the $7bn acquisition of Grail, a cancer screening startup, by biotech firm Illumina.
Tapestry has secured approval for its Capri buyout from European and Japanese regulators. However, the U.S. government is the last holdout, looking to thwart the acquisition.
