Maker of Michael Kors handbags loses nearly half its value after courts block acquisition by parent company of Coach
This freezing of the planned $8.5 billion deal is causing traders to doubt other M&A activity will be approved, too.
“Antitrust has come into fashion,” wrote US District Court Judge Jennifer Rochon in blocking the acquisition of Capri Holdings, home to the Versace, Jimmy Choo, and Michael Kors brands, by Tapestry Inc., home to the likes of Coach and Kate Spade.
This big win for the US Federal Trade Commission is causing major market moves. Capri’s stock has nearly halved in the premarket, while Tapestry’s shares are up double digits.
The ruling means the FTC will now have time to make its own decision on the merits of the planned $8.5 billion deal.
The judge noted that the defendants argued there is no such thing as “accessible luxury” despite Coach having coined the term ahead of its IPO at the dawn of the new millennium.
“Downplaying the importance of handbags as nonessential discretionary items that consumers can simply choose not to buy if the price is too high ignores that handbags are important to many women, not only to express themselves through fashion but to aid in their daily lives — from supporting their career aspirations by transporting their work materials home or inspiring confidence in professional settings, to holding important personal items such as medications or personal hygiene products, to carrying a young child’s snacks or toys,” Rochon wrote.
If you have friends in merger arb — that is, those who place bets that M&A activity not fully priced in by market participants will ultimately go through — check in on them today.
Per Bloomberg data, the likes of Millennium, Hudson Bay Capital, Pentwater Capital, Citadel Advisors, and Balyasny had accumulated shares of Capri by the end of Q2 and would be staring at big losses on their holdings if that position is still on. David Einhorn’s Greenlight Capital also bet on this deal going through, according to a recent letter to investors.
This decision is casting a pall over other deals that are in limbo, with shares of Albertsons — an acquisition target of Kroger — also down in the pre-market.
