Tapestry, the parent company of Coach, announced it is purchasing Capri Holdings, owner of Michael Kors and other luxury fashion brands for $8.5bn.
The deal will create an American luxury fashion conglomerate that will rival major competitors in Europe, including fashion behemoth LVMH and Gucci owner Kering.
After its acquisition of Capri, Tapestry will house six major luxury brands. Tapestry, formerly known as Coach, is the owner of its former namesake, along with Kate Spade and Stuart Weitzman. Capri is the parent company of Michael Kors, Versace and Jimmy Choo.
Tapestry is paying Capri shareholders $57 per share in cash, representing a premium of nearly 65%. After the deal was announced, Tapestry shares fell 8%, while Capri shares were trading at $54.90.
In a statement, Tapestry chief executive Joanne Crevoiserat said the acquisition “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”.
Capri CEO John Idol said in a 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.”
The executives said the acquisition will help expand the global operations of the brands across 75 countries and will help the companies save on supply-chain resources.
The new fashion house will be far smaller than its European rivals. Last year, the two companies saw a combined $12bn in revenue. Meanwhile, LVMH, owner of 75 brands, including Louis Vuitton and Dior, reported $87bn in revenues. Kering, owner of Gucci and Balecianga, brought in $23bn in revenue.
In a statement, Neil Saunders of GlobalData said the deal “comes at a time when luxury is facing something of a slowdown, especially in the North American market”.