Fashion brand Coach’s owner, Tapestry, has acquired the global luxury fashion house Capri Holdings in a move which could well pave the way for an American luxury conglomerate. The acquisition unites six famed fashion houses – Tapestry’s Coach, Kate Spade, Stuart Weitzman and Capri’s Versace, Jimmy Choo, and Michael Kors. The acquisition marks a major step that will help create a strong position for both companies in the luxury market.
This strategic deal will help Tapestry expand its reach and presence notably to more potential customers. In a statement, Tapestry revealed that the combined company created global annual sales of more than $12 billion in the past fiscal year, with a presence in more than 75 countries.
Joanne Crevoiserat, CEO of Tapestry, Inc, said, “…we’ve created a dynamic, data-driven consumer engagement platform that has fuelled our success, fostering innovation, agility, and strong financial results. From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands.”
The all-cash offer for Capri Holdings of $57 per share represents a premium of approximately 59% to the 30-day volume weighted average price ending August 9, 2023. The total enterprise value of the transaction of approximately $8.5 billion represents a 9x adjusted EBITDA multiple on a trailing-twelve-month basis, or 7x including expected synergies.
Since the announcement on August 10, 2023, the stock price of Tapestry fell down from $41 approximately to $35 approximately at the time of reporting. Capri Holdings’ stock, on the other hand, shot up after the announcement, from approximately $34 to approximately $53 at the time of publishing.
John D. Idol, Chairman and CEO of Capri Holdings Limited, said, “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.”
Establishing a powerful house of iconic luxury and fashion brands across consumer segments globally, this acquisition will build Tapestry’s portfolio in the attractive $200+ billion global luxury market for handbags, accessories, footwear, and apparel, where the company has deep experience and expertise, while providing deeper access to luxury consumers and market segments. It also broadens Tapestry’s product offering through an increased penetration of lifestyle categories, notably footwear and ready-to-wear, where Capri Holdings brings extensive expertise with further opportunity for growth.
Tapestry, Inc.’s Chief Financial Officer and Chief Operating Officer, Scott Roe, said, “The acquisition of Capri Holdings accelerates our strategic agenda and represents a significant value creation opportunity. Importantly, this combination is immediately accretive on an adjusted basis and enhances Tapestry’s total shareholder return. This includes more than $200 million in expected run-rate cost synergies within three years of deal closing. Further, our diversified, strong, and consistent cash flows will allow us to continue to invest in our business and rapidly pay down debt – aligned with our commitment to maintaining an investment grade rating – while returning capital to shareholders, including today’s announced 17% increase in our dividend per share. Overall, we are disciplined financial operators and allocators of capital with a relentless drive to deliver meaningful shareholder value.”
There is a recent wave of mergers and acquisitions in the luxury industry which has been fueling much excitement in the sector. From Kering acquiring Creed to buying a stake in Valentino recently, the luxury market is seeing an increased activity.
It remains to be seen how the new American fashion powerhouse holds up against its European luxury counterparts.
