Tapestry Buys Michael Kors - Capri Holdings

Tapestry Pays $8.5 Billion to Buy Michael Kors, Versace, & Jimmy Choo – Capri Holdings

Parent Company of Coach Expands Its Influence, Strengthening Competition Against European Luxury Leaders

Tapestry, headquartered in New York and the parent company of Coach, has successfully concluded a dramatic $8.5 billion deal purchasing Capri Holdings, owners of Michael Kors, Versace, and Jimmy Choo. This strategic move signifies Tapestry’s desire to position itself as a compelling rival to the esteemed European luxury powerhouses.

Tapestry’s enriched portfolio now proudly encompasses the labels formerly under the Capri Holdings umbrella, including Michael Kors, Versace, and Jimmy Choo. These exceptional brands are seamlessly woven into Tapestry’s existing collection, which features renowned names such as Coach, Kate Spade, and Stuart Weitzman.

The culmination of years of deal-making, this transaction represents America’s closest approach to establishing a branded portfolio powerhouse akin to LVMH Moët Hennessy Louis Vuitton or Kering. The commanding influence of LVMH and Kering has consistently given them a significant advantage across various fronts, including retail, marketing, and talent recruitment. Their continuous expansion of brand portfolios solidifies their dominance within the industry, as highlighted by Kering’s recent investment in a 30 percent stake in Valentino and LVMH’s monumental $16 billion acquisition of Tiffany in 2021.

We are ready to leverage our competitive advantages across a broader portfolio of brands. The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world.

Joanne Crevoiserat, CEO Tapestry

American fashion contenders have embarked on endeavors to strengthen their presence, exemplified by Tapestry’s previous acquisitions. Back in 2017, operating under its former name Coach Inc, the company acquired Kate Spade for $2.4 billion. Around the same time, Capri Holdings, then known as Michael Kors, secured Jimmy Choo for $1.2 billion, followed by the subsequent acquisition of Versace for $2.2 billion the following year.

Despite these efforts, the American fashion landscape still maintains a relatively smaller scale when compared to their European counterparts. Tapestry’s current market capitalization stands at approximately $10 billion, while Capri is valued at around $4 billion. In stark contrast, European giants like Kering boast a market value of approximately $72 billion, and the industry titan LVMH, overseeing a portfolio of 75 prestigious brands, commands an impressive market capitalization of $456 billion. This strategic acquisition represents a significant leap forward for Tapestry, as it endeavors to bridge this gap and amplify its influence on the global luxury fashion stage.

Today’s announcement marks a major milestone for Capri. 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. We are confident this combination will deliver immediate value to our shareholders. It will also provide new opportunities for our dedicated employees around the world as Capri becomes part of a larger and more diversified company. By joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands.

John D. Idol, chairman and CEO of Capri Holdings

The merged entity will command a workforce of over 33,000 employees across 75 countries, boasting an adjusted operating profit of nearly $2 billion from the previous year.

This consolidation will provide a significantly expanded global presence, facilitating potential cost reductions of up to $200 million in corporate overhead for enhanced operational efficiency. A broader brand portfolio ensures increased stability, with the strength of multiple brands offering protection during periods of individual brand underperformance.

In accordance with the agreement, Tapestry will acquire Capri at a price of $57 per share, totaling $6.7 billion for Capri’s investors and valuing the company at $8.5 billion based on an enterprise valuation. This translates to a deal valuation of 9 times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Financing for the deal is already secured, with $8 billion in bridge financing from Bank of America and Morgan Stanley Senior Funding, eliminating the need for new financing. Tapestry plans to temporarily halt share repurchase activities to reduce debt and aims to achieve a leverage ratio of below 2.5 times debt-to-EBITDA within two years of the deal’s completion.

This acquisition will reinforce Tapestry’s position in the luxury sector through Versace and Jimmy Choo while significantly expanding its presence in the accessible price range targeted by Coach through the inclusion of Michael Kors.