Fashion company Tapestry announced on Thursday that it won’t pursue the $8.5 billion acquisition of rival Capri anymore. The announcement comes several weeks after the U.S. District Judge Jennifer Rochon blocked the proposed deal.
Tapestry, which owns brands like Coach and Kate Spade, and Michael Kors owner Capri announced their merger in August 2023. The two companies said that the move will help them strengthen their position in the global market and rival European fashion houses.
However, the Federal Trade Commission (FTC) challenged the deal, arguing it would impact “direct head-to-head competition,” considering Tapestry and Capri are the two largest handbag manufacturers in the United States. FTC believed that the merged company would receive too much pricing power and could unilaterally increase the costs for consumers.
Tapestry already laid groundwork for termination of the merger, halting the plans to integrate Capri into its business last week. It now said that “terminating the merger agreement at this time is in the best interest of both companies” due to the uncertain outcome of the legal process. It will reimburse Capri for expenses tied to the failed merger of around $45 million.
The development caused Tapestry’s stock to jump by 8% as investors likely believe the company is better positioned for success on its own, considering Capri’s recent struggles. The shares of Tapestry have risen by 34.29% since the beginning of the year.
Capri’s stock, on the other hand, dipped by 6% and is around 61% down year-to-date.