Tapestry, Inc., the house of iconic accessories and lifestyle brands, including Coach, Kate Spade, and Stuart Weitzman, and Capri Holdings Limited, a global fashion luxury group comprised of Versace, Jimmy Choo and Michael Kors, reported entering into a definitive agreement to acquire Capri Holdings. Under the transaction terms, Capri Holdings shareholders receive $57.00 per share in cash for a total enterprise value of approximately $8.5 billion.

This acquisition combines six complementary brands with global reach, powered by Tapestry’s “data-rich customer engagement platform and diversified, direct-to-consumer operating model.” The combined company generated over $12 billion in global annual sales with a presence in over 75 countries with nearly $2 billion in adjusted operating profit in the prior fiscal year.

The Boards of Directors of Tapestry, Inc. and Capri Holdings Limited unanimously approved the transaction, expected to close in the calendar year 2024, subject to approval by the Capri Holdings shareholders, as well as the receipt of required regulatory approvals and other customary closing conditions.

The all-cash offer for Capri Holdings of $57.00 per share represents a premium of approximately 59 percent to the 30-day volume weighted average price ending August 9, 2023. The total enterprise value of the transaction of about $8.5 billion, representing a 9x adjusted EBITDA multiple on a trailing twelve-month basis, or 7x, including expected synergies.

The transaction is not subject to a financing condition.

Tapestry secured $8.0 billion in fully committed bridge financing from Bank of America N.A. and Morgan Stanley Senior Funding, Inc. The purchase price of approximately $8.5 billion is expected to be funded by a combination of senior notes, term loans and excess Tapestry cash, a portion used to pay certain of Capri’s existing outstanding debt.

Tapestry engaged with the rating agencies and is committed to a solid Investment Grade Rating.

Tapestry will suspend its share repurchase activity to prioritize de-leveraging via debt reduction and anticipates reaching a leverage ratio of below 2.5x Debt/EBITDA within 24 months post-close. Tapestry is instituting a long-term leverage target of under 2.5x Debt/EBITDA.

Joanne Crevoiserat, CEO of Tapestry, Inc., said, “We are excited to announce the acquisition of Capri Holdings, uniting six iconic brands and exceptional global teams. Tapestry is an organization with a passion for building enduring brands through superior design and craftsmanship and an unwavering focus on our customers. Importantly, we’ve created a dynamic, data-driven consumer engagement platform that has fueled our success, fostering innovation, agility, and strong financial results. From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands. The combination of Coach, Kate Spade, and Stuart Weitzman, together with Versace, Jimmy Choo, and Michael Kors, creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world.”

John D. Idol, chairman and CEO of Capri Holdings Limited, said, “Today’s announcement marks a major milestone for Capri. It is a testament to all that our teams have achieved in building Versace, Jimmy Choo, and Michael Kors into the iconic and powerful luxury fashion houses they are Today. We are confident this combination will deliver immediate value to our shareholders. It will also provide new opportunities for our dedicated employees around the world as Capri becomes part of a larger and more diversified company. By joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands.”

Tapestry, Inc.’s CFO/COO, Scott Roe, said, “The acquisition of Capri Holdings accelerates our strategic agenda and represents a significant value creation opportunity. Importantly, this combination is immediately accretive on an adjusted basis and enhances Tapestry’s total shareholder return; this includes more than $200 million in expected run-rate cost synergies within three years of the deal closing. Further, our diversified, strong, and consistent cash flows will allow us to continue to invest in our business and rapidly pay down debt—aligned with our commitment to maintaining an investment grade rating—while returning capital to shareholders, including Today’s announced 17 percent increase in our dividend per share. Overall, we are disciplined financial operators and allocators of capital with a relentless drive to deliver meaningful shareholder value.”

Morgan Stanley & Co, LLC serves as Tapestry, Inc.’s exclusive financial advisor, and Latham & Watkins LLP is its legal advisor. Capri Holdings Limited’s financial advisor is Barclays, and its legal advisor is Wachtell, Lipton, Rosen & Katz.

Photo courtesy Versace