Capri Holdings (CPRI), the parent company of Michael Kors and Jimmy Choo, saw shares tumble about 45% in premarket trading on Friday after a US judge blocked its pending $8.5 billion merger with Coach owner Tapestry (TPR).
In a court filing obtained by Yahoo Finance, US District Judge Jennifer Rochon ruled that “antitrust has come into vogue,” arguing that the merger of the two fashion powerhouses would “significantly reduce competition in the market for affordable luxury handbags.”
Tapestry and Capri announced their proposed merger last year. The combination would bring 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.
Shares of Tapestry moved in the opposite direction of Capri after Thursday’s news, rising about 12%.
In a statement released Thursday evening, Tapestry said it plans to appeal the decision, adding: “Tapestry and Capri operate in an industry that is intensely competitive and dynamic, constantly expanding and highly fragmented among established players and new players.
“We face competitive pressures from both lower and higher prices and continue to believe this transaction is pro-competitive and pro-consumer.”
Federal Trade Commission moved into the block acquisition in April, seeking a preliminary injunction to stop the deal. That ban was issued by Rochon on Thursday.
At the time, the agency argued that the merger would “[threaten] deprive consumers of competition for affordable handbags, while hourly workers will lose the benefits of higher wages and more favorable workplace conditions.”
Tapestry countered those claims, arguing that the merger was necessary to compete with dominant European players like Gucci.
The ruling blocks the merger while the FTC continues its proceedings, but all parties will still have the opportunity to argue their case before the FTC.
Before Thursday’s decision, Pauline Brown, the former North American president of LVMH, which owns fashion brands such as Louis Vuitton and Dior, he told Yahoo Finance The FTC would face a “major hurdle” in presenting its evidence.
“The hardest part of their legal argument is that there is a natural market … for what they call luxury handbags at affordable prices,” she said at the time. “The reality is, I think it’s a spectrum.”
She added that it’s a “weak argument” to say that consumers will be hurt by higher prices because “customers, if they’re happy, will still come for the right price, for the right design. And if they’re not, they’ll go to another player.”
The ruling will likely be seen as a victory for the Biden administration, which it is push aggressively for more competition in different sectors of the economy as consumers face high prices.
Yahoo Finance Senior Legal Reporter Alexis Keenan contributed to this report.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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