Coach and Versace parent companies combine in $13bn mega luxury brand deal
A new giant is emerging in the luxury fashion world after two major companies signed a massive $US8.5 billion ($A13 billion) deal.
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A new giant is emerging in the luxury fashion industry after Tapestry, the parent company of Coach and Kate Spade, acquired Versace and Michael Kors’ parent Capri Holdings in a mammoth $US8.5 billion ($A13 billion) deal.
The deal combines the two companies’ smorgasbord of high-end flagship brands across an array of sectors – including apparel, ready-to-wear, jewellery, watches and alcohol – in a bid to compete with luxury’s top contenders.
The luxury sector has long been dominated by European houses LVMH and Kering, the parent companies of Louis Vuitton and Gucci, respectively, among other globally renowned brands.
Together Capri and Tapestry will attempt to compete more effectively in the world of luxury handbags – a strength of Michael Kors and Coach – and shoes – a strength of Jimmy Choo, for Capri, and Stuart Weitzman for Tapestry.
In announcing the acquisition, Tapestry Inc. chief executive officer Joanne Crevoiserat said the house was “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,” she said.
Capri chief executive officer John Idol echoed her enthusiasm in his statement.
“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,” he said, adding he was confident the deal would deliver immediate value to shareholders.
Under the terms of the acquisition, Capri Holdings shareholders will receive $US57 ($A87) a share in cash, the statement reads, a 65 per cent premium over the house’s last closing price.
It makes for a total enterprise value of $US8.5 billion – including $US1.7 billion ($A2.6 billion) in net debt, according to the Sydney Morning Herald.
Together, the businesses will be the fourth-largest luxury company in the world, with a market share of around 5.1 per cent, and the second-largest player in the Americas – behind LVMH – according to GlobalData analyst Neil Saunders, SMH reports.
Experts have hypothesised the companies, together, will come to dominate the US handbag market, as they are more “accessible” and less expensive than the highest-end brands like Louis Vuitton or Gucci.
They predict Tapestry will look to rollout Capri’s Michael Kors in China, where it has successfully embedded Coach for decades, to compensate for slow sales in the US.
And by bringing Capri’s Versace under its roof, Tapestry gains its first access to European luxury consumers; which it will be sure to capitalise on.
In the announcement of the acquisition, the companies said there were no financing conditions attached to the deal.
Tapestry secured $US8 billion in fully committed bridge financing from Bank of America Corp and Morgan Stanley and expects to fund the $US8.5 billion purchase through a combination of senior notes, term loans and excess Tapestry cash, using a portion of it to pay down some of Capri’s outstanding debt.
Tapestry said the acquisition will generate cost synergies of more than $US200 million ($A306 million) “within three years of deal closing” due to enhanced operating efficiencies.
It also said the new company will employ more than 33,000 people globally.
It is the latest luxury acquisition in a number of high-end houses snapping up smaller fashion brands in the face of inflation and consumers steadying their spending hand.
Cosmetics firm Estée Lauder Cos. took over Tom Ford in a $US2.8 billion ($A4.3 billion) deal announced last year and completed in April.
Meanwhile, European titan Kering, which was in talks to buy Tom Ford, agreed to acquire a 30 per cent stake in fashion house Valentino for around $US1.9 billion ($A2.9 billion) last month. In June, the house also acquired perfume maker Creed at an undisclosed valuation.
And just days ago, Australia’s own luxury womenswear label Zimmerman sold a majority stake of its company to private equity investors for a record-breaking sum.
Originally published as Coach and Versace parent companies combine in $13bn mega luxury brand deal
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