Capri shares fall 46% after US court blocks $8.5 billion merger with Tapestry By Reuters
(Reuters) – Shares of Michael Kors owner Capri fell nearly 46% in retail trading on Friday after a U.S. judge blocked its pending $8.5 billion merger with bag maker Tapestry (NYSE: ).
Tapestry agreed to buy Capri last year to create a US giant that could better compete with bigger European rivals by delivering products. Coach Kate Ok, Versace, Jimmy Choo and Michael Kors under one roof.
The Federal Trade Commission (FTC) sued to block the deal in April, saying it would eliminate “direct competition” between America's top two wallet makers.
If the deal doesn't work out, “Capri may be looking for someone else to court” as he deals with the fallout from the Michael Kors murder, said Dana Telsey of the Telsey Advisory Group.
Tapestry shares rose nearly 13%. Analysts said the deal would have been an additional risk to parent Coach even though it was well-placed to revive Capri.
During an eight-day hearing in September, the FTC argued that the deal would create a giant company with the power to raise prices unfairly. U.S. District Judge Jennifer Rochon dismissed the companies' defenses, including their contention that the bags are nonessential items and that consumers can control prices by not buying them if they are too expensive.
Tapestry believes the decision was wrong and plans to appeal, it said Thursday.
“I think the (defense) parties may try to get a quick appeal to the second circuit. I think they have an opportunity in their timeline to do that,” said Mike Keeley, partner and chair of the antitrust group at Axinn, Veltrop. & Harkrider LLP.
