Capri and Tapestry called off their merger on Thursday after the Federal Trade Commission successfully sued to block the megadeal.
The two U.S.-based luxury houses “mutually agreed” that terminating the merger was in their best interests as they were unlikely to get regulatory approval before the deal was set to expire in February, according to a news release.
“With the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses,” Capri CEO Johh Idol said in a statement. “Looking ahead, I remain confident in Capri’s long-term growth potential for numerous reasons.”
The $8.5 billion acquisition, originally announced in August 2023, would have married America’s two largest luxury houses and put six fashion brands under one company: Tapestry’s Coach, Kate Spade and Stuart Weitzman with Capri’s Versace, Jimmy Choo and Michael Kors.
In April, the FTC sued to block the deal, saying the tie-up would disadvantage consumers and reduce benefits for the companies’ employees. Last month, a federal judge ruled in the FTC’s favor and granted its motion for a preliminary injunction to block the proposed merger.
At the time, Tapestry said it would appeal the ruling.
In its own news release Thursday, Tapestry said that it doesn’t need Capri to continue growing and will use the cash it’s freed up to fund an additional $2 billion share repurchase authorization.
“We have always had multiple paths to growth and our decision today clarifies the forward strategy. Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business,” CEO Joanne Crevoiserat said in a statement.
Tapestry plans to fund the stock repurchase through a combination of cash on hand and debt.
The company said Thursday “there is no break fee associated with the transaction,” but under the terms of the merger agreement, Tapestry had agreed to pay Capri for its expenses if the deal failed to earn regulatory approval. Tapestry said it will reimburse Capri around $45 million.