Coach owner to buy Michael Kors parent in $8.5 billion deal

China rollout

Tapestry, whose Coach brand has been in China for decades, will likely focus on accelerating the rollout of Michael Kors in the country, which could help compensate for more sluggish sales lately on the companies’ home turf in the US. Tapestry generates around 15% of its revenue in China, while Capri makes around 6% to 8% of sales in the country. 

By adding Versace to its brands, the acquisition gives Tapestry its first direct access to a European luxury marque. Capri bought Versace in 2018 and has focused on increasing the brand’s sales of handbags and other accessories, successfully boosting revenue. 

The companies said there are no financing conditions attached to the deal. Tapestry has secured $8 billion in fully committed bridge financing from Bank of America Corp. and Morgan Stanley. The company expects to fund the $8.5 billion purchase price through a combination of senior notes, term loans and excess Tapestry cash, using a portion of it to pay down some of Capri’s debt.

Capri’s shares have tumbled recently as a pullback in spending by US consumers in department stores dented sales of the mass-market Michael Kors brand. The company shares had fallen around 31% in the past 12 months.

Capri, also based in New York, had been scheduled to report fiscal first-quarter earnings on Aug. 8. The company announced it would reschedule the earnings for Thursday, without explanation. The two companies are holding a joint conference call that started at 8 a.m. New York time.