Tapestry CEO on $8.5 billion deal for Michael Kors owner Capri: We made the right call

The Tapestry CEO stood by the fashion company’s decision to buy Michael Kors, Jimmy Choo, and Versace.

“This is a very attractive combination,” Crevoiserat told Yahoo Finance Live (video above) on Friday. “We are establishing a powerful global house of iconic fashion brands.”

Tapestry shocked Wall Street on Thursday by announcing it will spend $57 a share to buy rival Capri Holdings (CPRI) for a total enterprise value of $8.5 billion. The transaction will see Tapestry — the steward of Coach, Kate Spade, and Stuart Weitzman — gain control of Versace, Michael Kors, and Jimmy Choo by sometime in 2024.

Capri’s stock surged 55% to $53.90 on Thursday. But Tapestry stock fell 15.93% to $34.67 as some experts began to question whether the company needed to pull the trigger and if it overpaid for Capri.

Tapestry paid “a healthy multiple on a company that I just don’t think was that healthy,” Pauline Brown, former LVMH Chairman of North America, told Yahoo Finance.

Crevoiserat thinks the deal will be proven right over time as her C-suite extracts cost efficiencies from the combined company and expands it in the fast-growing Asia luxury market.

Here are several high-level points from the term sheet:

  • The purchase price for Capri marked a 39% premium to its closing price on Wednesday.
  • $200 million in cost synergies are expected by three years after the deal closes.
  • A 17% quarterly dividend was approved despite the transaction.
  • The deal will be funded through a mix of new debt and cash on the balance sheet.

The transaction marks the next chapter for Crevoiserat at Tapestry.

Crevoiserat joined Tapestry in 2019 as CFO after a successful stint at Abercrombie & Fitch as CFO and COO. In October 2020, Crevoiserat was named CEO amid deep struggles for the owner of Coach and the newly acquired Kate Spade brand.

A person carries a bag from the MICHAEL KORS store.
A person carries a bag from the Michael Kors store on Aug. 26, 2018, in Central Valley, New York. (Gary Hershorn/Getty Images)

The longtime retail exec moved quickly to slash hundreds of millions in costs via store closures and corporate headcount reductions. She also sharpened how new handbags and accessories are brought to market — and doing so has helped keep inventory under control and margins solid.

“We will now have 33,000 team members across the globe,” Crevoiserat said when reflecting on the deal and her 35-year retail career. “I think that is a powerful opportunity, one we don’t take lightly. I think it will solidify our growth going forward.”

Meanwhile, the transaction also represents an ongoing current of deals in the luxury goods space.

Within the last three years, LVMH (LVMUY) spent $15.8 billion to buy Tiffany & Co. and $3.5 billion for a majority stake in Birkenstock.

And just this year, Kering bought a 30% stake in Valentino for $1.7 billion and spent $3.8 billion to scoop up high-end fragrance maker Creed.

For its part, Capri spent $2.1 billion to buy Versace in 2018 and $1.2 billion on Jimmy Choo in 2017.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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