By Emmanuel Nduka
American owner of lifestyle brands including Coach and Kate Spade – Tapestry, announced on Thursday that it will acquire Michael Kors parent company Capri for $8.5 billion, creating a new global fashion giant to compete with European powerhouses.
Part of the deal will see the unified company to include Tapestry’s Stuart Weitzman and Capri’s Jimmy Choo — both shoe powerhouses — as well as Versace, a go-to brand for Hollywood A-listers looking to make a splash on red carpets.
This will give Tapestry multiple brands marketed around shoes and handbags, as well as a strengthened apparel offering with Versace and Kors, also a celeb favorite, a merger which will “create a new powerful global luxury house,” Tapestry chief executive Joanne Crevoiserat, said.
Tapestry says the all-cash takeover aims to boost sales across an upscale portfolio by combining customer data streams, broadening geographic reach and achieving some $200 million in annual cost savings within three years of the deal closing.
“We’ve created a dynamic, data-driven consumer engagement platform that has fueled our success.From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands,” the company said.
Meanwhile, Neil Saunders, Managing Director of Consultancy GlobalData, said the transaction aims to enable Tapestry to benefit from a similar strategy to that employed by European powerhouses like LVMH based around “a patchwork of brands appealing to different segments, rather than by making individual brands ubiquitous.”
She said while there is a lot of logic behind the deal, the price is “hefty”. She described the state of the Michael Kors brand as a declining “mess.”
“Admittedly, Tapestry has plenty of experience of reviving problem brands from its turnaround of Coach, which had become ubiquitous and sullied through constant discounting and promotions
“Kate Spade was also in a similar position when Tapestry acquired it, and is now emerging in positive form from a successful reinvention. While the same thinking and playbook can be applied to Michael Kors, a turnaround will be far more complex and intricate,” Saunders said.
Tapestry is expected to finance the deal through a combination of corporate bonds, bank loans and excess cash, and will suspend its share repurchase plan.
