Capri Holdings Ltd. (NYSE: CPRI), and Tapestry Inc. (NYSE: TPR), have mutually agreed to cancel the planned merger which would have combined six luxury fashion brands into one fashion giant.
The news comes only weeks after a federal court ruled in favor of the Federal Trade Commission, which sued in April to block the deal due to competition concerns.
Capri Holdings shares have fallen by 6.0% since Thursday, after falling by close to 50% in the last month following a federal ruling.
Capri still has long-term potential for CEO
John Idol, the chief executive officer of Capri Holdings, continues to see “numerous” reasons for why his company has long-term potential.
In a Thursday statement, he said that the fashion giant had “recently begun to implement a variety of strategic initiatives in order to return our luxury homes to growth.”
Investors can expect to hear more about these “reasons” as well as “strategic initiative” during the conference call scheduled by the company with analysts for 11 a.m. ET today.
Investors will be focusing on Michael Kors, as it has been Capri Holdings’ biggest weakness in recent years.
Capri stock has dropped more than 70% since its peak in February 2023.
Will Tapestry pay Capri Holdings a breakup charge?
Tapestry announced its first plans to purchase Capri Holdings back in August 2023.
It agreed to pay Capri $50 million in the event of a failed deal due to significant regulatory obstacles. The two companies “mutually decided to terminate the deal Thursday.”
It is not clear whether Tapestry will still pay a fee for Capri Holdings.
Michael Kors, Versace and Jimmy Choo owners also committed today to focus on “brand desirability by exciting communication, compelling products and omnichannel customer experience” in order to boost sales, which dropped another 16% during the latest reported quarter.
Capri does not pay a dividend at this time.
Why did Tapestry share prices rise on Thursday?
The shares of Tapestry Inc. were comfortably in the black this morning after the news of the failed merger with Capri Holdings.
Analysts had already soured on the deal due to concerns that Tapestry might have to pay too much for Capri because of the lengthy approval process.
Evercore ISI believes that TPR shares can rise to $63 in the future, a price target which indicates a potential 17% increase.
Tapestry announced Thursday that it would resume its stock repurchase program and buy back $2 billion of its shares. Evercore ISI estimates that the accelerated share buyback program could boost its EPS estimates by up to 3% for 2025.
Tapestry pays a dividend yield at writing of 2.73%, which is another reason to include it in your portfolio.
This post What next for Capri Holdings following the end of Tapestry merger? This post may be updated as new information becomes available.
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