Capri Holdings Limited Issues Statement on FTC Action Seeking to Block Proposed Transaction with Tapestry, Inc.

Rhea-AI Summary

Capri Holdings responds to the FTC's challenge to the proposed acquisition by Tapestry, Inc., highlighting market dynamics and commitment to defending the case in court.

Insights

Legal Expert

The FTC's intervention to challenge the acquisition of Capri by Tapestry is a significant legal maneuver that underscores the regulatory emphasis on antitrust laws. The FTC's action suggests it believes this merger could potentially reduce competition in the luxury fashion market, despite Capri's assertion of the industry being 'highly fragmented'. It is essential to scrutinize the FTC's claim by understanding the market share that a combined entity would hold and the impact on competitive pricing and product diversity. If the FTC's assessment gains legal traction, the acquisition might face substantial delays or ultimately be prohibited, which could affect the market value and strategic positioning of both Capri and Tapestry, potentially leading to volatility in their stock prices.

Financial Analyst

From a financial perspective, the regulatory challenge introduces uncertainty into the market, which can lead to investor apprehension. Typically, this type of news triggers a risk-averse sentiment that might be reflected in the trading behavior affecting the stock prices of the companies involved. If Capri's legal defense proves unsuccessful, the costs associated with the court proceedings and the potential for a breakup fee, can have a tangible impact on their financials. On the flip side, should the deal proceed, synergies and the potential for increased market presence could enhance shareholder value in the long term. Evaluating the price-to-earnings ratio of both companies in relation to their peers could provide additional context on the potential financial outcome of this transaction.

Market Research Analyst

From a market dynamics standpoint, the FTC's challenge indicates heightened scrutiny of the luxury sector's consolidation. The claim of low barriers to entry by Capri needs to be weighed against the brand equity and market penetration that established players like Capri and Tapestry command. Understanding consumer behavior, brand loyalty and the purchasing patterns within the luxury segment is important to assess whether the merger would indeed not 'limit, reduce, or constrain competition' as Capri suggests. A deep dive into the luxury handbag market and consumer trends could reveal whether the FTC's concerns are warranted or if the current competition is indeed sufficient to maintain a healthy market post-acquisition.

LONDON--(BUSINESS WIRE)-- Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today issued the following statement in response to the U.S. Federal Trade Commission’s (FTC) unprecedented challenge to the proposed acquisition of Capri by Tapestry, Inc. (NYSE: TPR):

(Photo: Business Wire)

“Capri Holdings strongly disagrees with the FTC’s decision. The market realities, which the government’s challenge ignores, overwhelmingly demonstrate that this transaction will not limit, reduce, or constrain competition. Tapestry and Capri operate in the fiercely competitive and highly fragmented global luxury industry. Consumers have hundreds of handbag choices at every price point across all channels, and barriers to entry are low. Capri intends to vigorously defend this case in court alongside Tapestry and complete the pending acquisition. The U.S. FTC is the only regulator that did not approve this transaction, which received required approvals from all other jurisdictions. We remain confident in this combination and the value it will bring to all stakeholders.”

About Capri Holdings Limited

Capri Holdings is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and Michael Kors. Our commitment to glamorous style and craftsmanship is at the heart of each of our luxury brands. We have built our reputation on designing exceptional, innovative products that cover the full spectrum of fashion luxury categories. Our strength lies in the unique DNA and heritage of each of our brands, the diversity and passion of our people and our dedication to the clients and communities we serve. Capri Holdings Limited is publicly listed on the New York Stock Exchange under the ticker CPRI.

Forward-Looking Statements

This report contains statements which are, or may be deemed to be, “forward-looking statements.” Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Capri about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. All statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “plans”, “believes”, “expects”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “might” or similar words or phrases, are forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements, including regarding the pending merger transaction with a wholly-owned subsidiary of Tapestry, Inc. (the "Merger"). These risks, uncertainties and other factors include the impact of the COVID-19 pandemic; changes in consumer traffic and retail trends; the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the pending Merger that could delay or result in the termination of the pending Merger, the occurrence of any other event, change or other circumstances that could give rise to the termination of the merger agreement entered into in connection with the pending Merger, the risk that the parties to the merger agreement may not be able to satisfy the conditions to the pending Merger in a timely manner or at all, risks related to disruption of management time from ongoing business operations due to the pending Merger, the risk that any announcements relating to the pending Merger could have adverse effects on the market price of Capri's shares, the risk of any unexpected costs or expenses resulting from the pending Merger, the risk of any litigation relating to the pending Merger, the risk that the pending Merger and its announcement could have an adverse effect on the ability of Capri to retain customers and retain and hire key personnel and maintain relationships with customers, suppliers, employees, shareholders and other business relationships and on its operating results and business generally, and the risk the pending Merger could divert the attention of Capri’s management; as well as those risks that are outlined in Capri’s disclosure filings and materials, which you can find on http://www.capriholdings.com, such as its Form 10-K, Form 10-Q and Form 8-K reports that have been filed with the SEC. Please consult these documents for a more complete understanding of these risks and uncertainties. Any forward-looking statement in this press release speaks only as of the date made and Capri disclaims any obligation to update or revise any forward-looking or other statements contained herein other than in accordance with legal and regulatory obligations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240422772581/en/

Investor Relations:

Jennifer Davis

+1 (201) 514-8234

Jennifer.Davis@CapriHoldings.com

Media:

Press@CapriHoldings.com

Source: Capri Holdings Limited

FAQ

Why did Capri Holdings issue a statement regarding the FTC action?

Capri Holdings issued a statement in response to the U.S. Federal Trade Commission's challenge to the proposed acquisition by Tapestry, Inc.

What is the ticker symbol of Capri Holdings ?

The ticker symbol of Capri Holdings is CPRI.

Who did the U.S. FTC challenge in their action?

The U.S. FTC challenged the proposed acquisition of Capri Holdings by Tapestry, Inc.

What market realities did Capri Holdings mention in their statement?

Capri Holdings mentioned market realities showing that the transaction will not limit, reduce, or constrain competition in the luxury industry.

Which regulators approved the transaction besides the U.S. FTC?

All other jurisdictions approved the transaction besides the U.S. FTC.