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Mergers and growth and consolidation, oh my!: Courts disallow Tapestry-Capri deal

November 7, 2024

Rania V. Sedhom is managing partner at Sedhom Law Group Rania V. Sedhom is managing partner at Sedhom Law Group

 

By Rania V. Sedhom

In September 2024, The Wertheimer and Bettencourt families, who own Chanel and L'Oréal, acquired a minority stake in The Row, worth $1 billion and owned by the Olsen sisters.

The Row, prior to the acquisition, had four stores worldwide. With a healthy valuation and cult following, the specific reason for the financial boost is uncertain, but an educated guess is that additional monies can fuel The Row's expansion, both geographically and categorically.

Last year, Kering purchased a 30 percent stake in Valentino, and last month, LVMH purchased a stake in Polene. These acquisitions cleared scrutiny, but the courts disallowed the Tapestry-Capri merger.

Getting to the bottom of the block
Tapestry, the owner of the Coach, Kate Spade and Stuart Weitzman brands, attempted to purchase Capri Holdings, the owner of the Michael Kors, Versace and Jimmy Choo brands, but was blocked from doing so due to antitrust worries.

The District Court in the Southern District of New York Court agreed with the FTC, which believes Tapestry has a voracious appetite for acquisitions and held that allowing the merger would impede new brands from entering the market and meaningfully competing in the market.

The Court was also worried that the merger would eliminate "accessible luxury handbags" and cause prices to increase and worried about layoffs. Both companies plan to appeal the decision.

In the meantime, let's examine where things stand today.

Status update
Capri continues to struggle. Its sales are down across all brands and with the state of the economy, is unlikely to improve in the immediate future.

Capri may be unable to turn things around without a new deal. If financial need necessitated the deal, how will a restructuring affect consumer and their purchase options?

If Capri's financial situation does not improve, layoffs will likely occur. How many employees will be laid off because of poor financial health vs. acquisition?

The FTC appears to be moving pro-consumer, but it is uncertain whether blocking this merger will ultimately help consumers.

Views shared are purely the author’s. Rania V. Sedhom is founding member and managing partner of the Sedhom Law Group, New York. Reach her at rsedhom@bespokelawfirm.com.