Capri Holdings (CPRI) saw its stock plummet over 47%, reaching a four-year low, as concerns about its declining market share intensified. Conversely, Tapestry Inc. (TPR, Financial) experienced a nearly 15% rise in its stock, marking the highest level in six years since 2018.
A U.S. federal district judge granted the Federal Trade Commission's (FTC) preliminary injunction to prevent Tapestry's $8.5 billion acquisition of Capri, which would have created a handbag retail giant. Although detailed judgment reasons were not disclosed, court documents revealed concerns about reduced competition in the affordable luxury handbag market.
Originally proposed in August last year, the merger intended to consolidate Tapestry's brands like Coach, Kate Spade, and Stuart Weitzman with Capri's Michael Kors, Versace, and Jimmy Choo into a single large group.
Following the unfavorable ruling, Capri's stock dropped more than 54% in after-hours trading and continued to slide over 47%, reaching below $22, significantly lower than Tapestry's $57 per share acquisition offer, wiping out more than $2.2 billion in market value. Analysts attributed Capri's stock slump to its severe market share issues.
Telsey Advisory Group's CEO, Dana Telsey, remarked that the appeal of the acquisition has diminished due to Capri's poor performance and extended transaction period caused by FTC's antitrust lawsuit. Telsey suggested that Capri might seek another buyer if the deal fails.
Meanwhile, Tapestry's stock rose sharply, as despite its capability to revive Capri, the acquisition poses additional risks for Coach's parent company. In April, the FTC aimed to block the merger over concerns of creating a dominant giant with unfair pricing power.
