Coach owner to acquire Michael Kors, Versace parent in $8.5bn deal

Tapestry, the US owner of lifestyle brands including Coach and Kate Spade, said Thursday it will acquire Michael Kors parent company Capri for $8.5 billion, creating a new global fashion giant to compete with European powerhouses.

The unified company will also include Tapestry's Stuart Weitzman and Capri's Jimmy Choo -- both shoe powerhouses -- as well as Versace, a go-to brand for Hollywood A-listers looking to make a splash on red carpets.

That will give Tapestry multiple brands marketed around shoes and handbags, as well as a strengthened apparel offering with Versace and Kors, also a celeb favorite.

The merger "creates a new powerful global luxury house," said Tapestry chief executive Joanne Crevoiserat.

The all-cash takeover aims to boost sales across an upscale portfolio by combining customer data streams, broadening geographic reach and achieving some $200 million in annual cost savings within three years of the deal closing, a joint press release said.

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"We've created a dynamic, data-driven consumer engagement platform that has fueled our success," Crevoiserat said.

"From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands."

'Patchwork of brands'

Neil Saunders, managing director of consultancy GlobalData, said the transaction aims to enable Tapestry to benefit from a similar strategy to that employed by European powerhouses like LVMH based around "a patchwork of brands appealing to different segments, rather than by making individual brands ubiquitous."

While "there is a lot of logic behind the deal," Saunders called Capri's price "hefty" and described the state of the Michael Kors brand as a declining "mess."

"Admittedly, Tapestry has plenty of experience of reviving problem brands from its turnaround of Coach, which had become ubiquitous and sullied through constant discounting and promotions," Saunders said.

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"Kate Spade was also in a similar position when Tapestry acquired it, and is now emerging in positive form from a successful reinvention. While the same thinking and playbook can be applied to Michael Kors, a turnaround will be far more complex and intricate."

Tapestry will finance the deal through a combination of corporate bonds, bank loans and excess cash. Tapestry will suspend its share repurchase plan.

Shares of Capri surged more than 57 percent to $54.49 in early trading, while Tapestry dropped 5.8 percent to $38.83.

Source: AFP