Capri Holding’s stock dropped 45% after a judge blocked their $8.5 billion deal to merge with Tapestry. According to Yahoo Finance that was able to obtain the court filing report, US District Judge Jennifer Rochon ruled that “antitrust has come into fashion,” arguing a merger between the two fashion powerhouses “will substantially lessen competition in the market for accessible-luxury handbags.”
The judge’s decision will stop the companies from moving forward with their agreement, which they hoped would create a stronger brand in the luxury retail market. Their combination would have brought together six high-profile fashion brands under one roof: Tapestry’s Coach, Stuart Weitzman, and Kate Spade with Capri’s Versace, Jimmy Choo, and Michael Kors.
The rejection of the deal raised concerns among investors about Capri’s future and potential growth prospects, which ultimately lead to the steep drop in its stock price.
In a statement released Thursday evening, Tapestry said it plans to appeal the decision, adding, “We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer.”
Tapestry and Capri also added that they face and work in an intensively competitive and dynamic environment. However, the Federal Trade Commission tried to encounter back this statement and stop the acquisition back in April by requesting a preliminary injunction.
On Thursday, the judge granted that injunction. The FTC argued that the merger would reduce competition for affordable handbags and could negatively impact hourly workers by limiting their wages and workplace conditions.
Furthermore, Tapestry refused to give up the acquisition, arguing a merger was necessary in order to compete against dominant European players like Gucci.
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