Court Sides with US Regulators... Coach-Michael Kors $12 Trillion Merger Blocked

The $8.5 billion (approximately 11.7 trillion KRW) acquisition attempt of Capri Holdings by Tapestry, the parent company of the American fashion brand Coach, has fallen through.

[Image source=Getty Images Yonhap News]

Jennifer Rochon, a judge at the U.S. District Court for the Southern District of New York, ruled on the 24th (local time) in favor of the Federal Trade Commission (FTC) in a lawsuit filed by the FTC to block Tapestry's acquisition of Capri. The FTC filed the lawsuit in April last year, arguing that if Tapestry acquired Capri, which owns brands such as Michael Kors and Versace, it could hinder competition in the so-called "affordable luxury bags" market.

As of 2022, the combined market share of Coach and Michael Kors in the North American handbag market is estimated at 17%. Their share in the affordable luxury bag segment, where individual bags are priced at several hundred dollars, rises to as much as 53%. This is the segment the FTC highlighted as potentially reducing competition. Additionally, the FTC pointed out that the merger could negatively impact wages and workplace benefits for industry workers. The total number of employees worldwide affected by the merger is approximately 33,000.

In response, Tapestry and Capri argued that they operate in a highly competitive market and that the merger was necessary to compete with European luxury brands, but their argument was ultimately rejected. Major foreign media outlets have noted that it is rare for regulatory authorities to block mergers and acquisitions (M&A) in the fiercely competitive fashion industry. Previously, the European Union (EU) and Japanese competition authorities had approved the merger of the two companies.

Tapestry announced in 2023 that it had signed a contract to acquire Capri Holdings' shares in cash at $57 per share. Accordingly, it was expected that a leading American fashion giant would be created, encompassing Tapestry's brands Coach, Kate Spade, and Stuart Weitzman, as well as Capri Holdings' brands Versace, Jimmy Choo, and Michael Kors.

Meanwhile, immediately after the court's decision, Tapestry's stock price surged over 12% in after-hours trading on the New York Stock Exchange, while Capri's stock price plummeted.