Capri Holdings (CPRI), the parent company of Michael Kors and Jimmy Choo, on Thursday after a U.S. judge blocked its pending $8.5 billion merger with Coach owner Tapestry (TPR). The stock price fell about 45% in after-hours trading.
In a court filing obtained by Yahoo Finance, U.S. District Judge Jennifer Rochon ruled that “antitrust laws are in vogue” and that the merger of the two fashion powerhouses would be “an affordable luxury… “Competition in the handbag market will be significantly reduced.”
Tapestry and Capri announced a proposed merger last year. The combination brings together six well-known fashion brands under one roof: Tapestry’s Coach, Stuart Weitzman, Kate Spade and Capri’s Versace, Jimmy Choo and Michael Kors.
Tapestry’s stock moved in the opposite direction to Capri on the news, rising about 13%.
Tapestry said in a statement Thursday evening that it plans to appeal the decision. “We operate in a highly fragmented industry,” he added.
“We continue to believe that this transaction is pro-competitive and pro-consumer as we face competitive pressures from both lower- and higher-priced products.”
The U.S. Federal Trade Commission moved to block the deal in April, seeking a preliminary injunction to halt the deal. The injunction was granted by Rochon on Thursday.
At the time, the agency said the merger would “deprive consumers of competition for affordable handbags (threat), while hourly workers would lose the benefits of higher wages and more favorable work conditions.” he claimed.
Tapestry has hit back at those claims, arguing that the merger is necessary to compete with European powerhouses like Gucci.
The ruling will block the merger while the FTC proceeds, but all parties will still have the opportunity to argue their case before the FTC.
Coach bags on display at a store in New York City on September 13, 2024. (Michael M. Santiago/Getty Images) · Michael M. Santiago via Getty Images
Prior to Thursday’s ruling, Pauline Brown, former North America chairman of LVMH, which owns fashion brands such as Louis Vuitton and Dior, told Yahoo Finance that the FTC would face “high hurdles” to make the case. spoke.
“The most troubling part of their legal argument is that there is a natural market for what they call affordable luxury handbags,” she said at the time. “The reality is, I think it’s a spectrum.”
He added that it was a “weak argument” that consumers would be penalized by higher prices, adding: “If customers are happy, they will buy the right price and the right design. If not, they’ll go to another player.”
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