Birth of a US Fashion Giant... Coach Acquires Versace and Jimmy Choo for 11 Trillion Won

Tapestry, the parent company of the American fashion brand Coach, is acquiring Capri Holdings, which owns brands such as Versace and Michael Kors, for $8.5 billion (approximately 11.17 trillion KRW). This is the largest merger and acquisition (M&A) deal in the global fashion industry in recent years.

[Image source=AP Yonhap News]

On the 10th (local time), Tapestry announced that it had signed a contract to acquire Capri Holdings' shares at $57 per share in cash. This price represents a 59% premium over Capri Holdings' 30-day volume-weighted average price as of the previous day.

With this, the American fashion giant will encompass six brands: Coach, Kate Spade, and Stuart Weitzman under Tapestry, and Versace, Jimmy Choo, and Michael Kors under Capri Holdings. Both parties emphasized that this merger will establish a foundation to sell products to consumers in 75 countries worldwide. The combined global annual revenue of the two companies exceeds $12 billion.

Joanne Crevoiserat, CEO of Tapestry, expressed, "We are pleased to announce the acquisition of Capri Holdings, which brings together six iconic brands and an outstanding global team." She expects the acquisition to provide a broader customer target and competitive advantage. Tapestry estimates cost savings of $200 million within three years.

Capri Holdings, founded by American fashion designer Michael Kors, owns the designer-named brand Michael Kors as well as Italian luxury brands Versace and Jimmy Choo, acquired in 2018 and 2017 respectively. The company thrived with a popular strategy led by Michael Kors, surpassing a corporate value of $20 billion by 2014. However, it has since faced business deterioration and poor performance, with its current market value dropping to around $4 billion. Its stock price has fallen 40% just this year. The acquiring company, Tapestry, is valued at about $10 billion. It recently raised its sales forecast for this year.

Tapestry and Capri Holdings conducted months of negotiations over this acquisition, and both boards reportedly approved it unanimously. Capri Holdings had initially scheduled its quarterly earnings announcement for the 8th but postponed it to the morning of the 10th without explanation, which is believed to be related to this acquisition. John Idol, CEO of Capri Holdings, said, "Through this acquisition, we will have greater resources and capabilities to accelerate global expansion while maintaining the unique DNA of our brands."

Experts and local media expect that the birth of this American fashion giant will enhance competitiveness against European fashion brands in the luxury and high-end markets. Craig Johnson, president of consulting firm Customer Growth Partners, told The New York Times (NYT), "Tapestry has become a true 'luxury house' like Europe's Kering and LVMH." The Wall Street Journal (WSJ) noted, "It is still smaller compared to European fashion giants," but added, "It will be able to increase competitiveness against European fashion brands."

Recently, European fashion companies such as LVMH, Gucci, and Kering have been expanding their size by acquiring various brands. Earlier, LVMH acquired jewelry company Tiffany & Co. in 2021, and Kering signed a contract to acquire a stake in the Italian luxury brand Valentino. Kering also attempted to acquire the American fashion brand Tom Ford but lost out to beauty brand Est?e Lauder in the competition.

Neil Saunders, managing director of GlobalData, pointed out that this M&A took place at a time when sales of high-end products in the North American market are slowing. He said, "Both Tapestry and Capri Holdings are looking to global markets for growth," and predicted, "This will provide much stability in pursuing bold global plans as a larger company."

Following the acquisition announcement, Capri Holdings' stock price on the New York Stock Exchange this morning traded about 56% higher than the previous close, offsetting a significant portion of this year's decline. In contrast, Tapestry's stock price fell by about 12%.