Kudlow panelists Liz Peek and Caroline Downey react to the FTC suing to block the $8.5 billion Tapestry-Capri merger.
A federal judge on Thursday blocked the pending merger of Tapestry and Capri on the grounds that the luxury handbag and accessories makers would undermine competition.
The proposed $8.5 billion merger between Tapestry and Capri was first proposed in August 2023 but faced scrutiny from the Federal Trade Commission (FTC), which sued to block the deal earlier this year.
The companies viewed the tie-up as a way to better compete with European rivals by uniting six brands – Tapestry’s Coach, Kate Spade and Stuart Weitzman; and Capri’s Versace, Jimmy Choo and Michael Kors – under a single entity.
U.S District Judge Jennifer Rochon rejected the companies’ defense of the deal, including the argument that handbags are nonessential items that consumers can influence the price of by not buying them if they’re too expensive. Rochon said that argument “ignores that handbags are important to many women, not only to express themselves through fashion but to aid in their daily lives.”
FTC MAY TRY TO BLOCK YET ANOTHER BUSINESS MERGER
Tapestry’s Coach is among the luxury brands that would be united under one entity under the proposed merger that a federal court has blocked. (Photographer: Michael Nagle/Bloomberg via Getty Images / Getty Images)
Tapestry argued that the judge’s ruling effectively blocks the merger by requiring an additional lengthy review by the FTC that would extend beyond the merger’s termination date of Feb. 10.
Rochon said the companies are free to defend the deal in the FTC’s process and are not required to abandon the deal if it hasn’t closed by that date.
Capri’s Versace is among the brands that would be unified under one corporate entity if the merger with Tapestry eventually proceeds. (Photo by Scott Olson/Getty Images / Getty Images)
Henry Liu, director of the FTC’s Bureau of Competition, said the decision is “a victory not only for the FTC, but also for consumers across the country seeking access to quality handbags at affordable prices.”
THE FTC: SEE HOW MANY MERGERS AND ACQUISITIONS IT BLOCKED DURING BIDEN ADMIN
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TPR | TAPESTRY INC. | 50.51 | +6.04 | +13.58% |
| CPRI | CAPRI HOLDINGS LTD. | 21.25 | -20.34 | -48.91% |
“We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer,” Tapestry said in a statement, noting that it disagrees with the ruling and plans to appeal.
Capri said in a press release that it and Tapestry intend to file a joint appeal with the U.S. Court of Appeals for the Second Circuit.
Capri is also the parent company of Michael Kors. (Photo by Scott Olson/Getty Images / Getty Images)
The two companies’ stock prices moved dramatically in opposite directions on Friday in response to the court ruling.
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Capri’s stock plunged by more than 48% while Tapestry’s rose by over 13%.
Reuters contributed to this report.