Tapestry, a US conglomerate of luxury fashion brands, has officially terminated its merger agreement with Capri Holdings, owner of Versace, Jimmy Choo and Michael Kors.
This decision to abandon the merger plans comes after a US district judge Jennifer Rochon stalled the prospective $8.5bn deal last month.
The merger, initially announced in August 2023, would have created a US luxury powerhouse to compete with larger European rivals.
Capri and Tapestry have mutually agreed that ending the merger is in their best interests due to the uncertain outcome of ongoing legal proceedings, which are unlikely to conclude before the set deadline of 10 February 2025.
Following this termination, Tapestry is set to redeem senior notes worth $6.1bn linked to the planned acquisition.
The redemption of these notes will be at a price equal to 101% of their principal amount plus accrued interest. Importantly, there is no break fee involved in this transaction.
Tapestry has also committed to reimbursing approximately $45m for Capri's expenses related to the deal.
Looking ahead, Tapestry plans to partly fund its share repurchase programme through future debt issuance. The company aims to keep its leverage below two and a half times gross debt to adjusted EBITDA and uphold its solid investment grade rating.
The company is also reiterating its fiscal 2025 outlook, which was initially provided on 7 November 2024, excluding the net benefit from the share repurchase programme and potential changes in net interest expense.
Tapestry CEO Joanne Crevoiserat commented on the development, stating: “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.
“Tapestry remains in a position of strength, with distinctive brands, an agile platform, passionate teams, and robust cash flow. We have significant runway ahead and are pleased to announce today an additional shareholder return programme, as we believe there is no better investment at this time than our own stock.”
