CPRI - Capri Holdings Still A Buy While Navigating EU Merger Control

2024-04-01 18:40:14 ET

Summary

• We don't see a significant impediment to effective competition in the European market, so we rank Capri as a Buy.
• With a firm $57 per share offer on the table, we see an attractive upside due to antitrust reviews and low risk.
• We see a higher probability of approval in Europe by mid-April, but August an option due to competition between Michael Kors, Coach, and Kate Spade.
• No concerns in luxury women's footwear (Jimmy Choo and Stuart Weitzman), but the affordable luxury market is more relevant to the European Commission.

On 10th Aug 2023, Tapestry, Inc. ( TPR ) and Capri Holdings Limited ( CPRI ) announced that they had reached a definitive agreement under which Tapestry would acquire Capri , providing Capri shareholders with $57 per share, a 65% premium to the prior closing at the time, and valuing the company at $8.5bn on an enterprise value basis.

The transaction, although not subject to financing conditions, is subject to customary closing conditions, including the receipt of antitrust approvals from the Federal Trade Commission ((FTC)) in the US and the EU Commission ((EC)) in Europe.

At the time of writing, the FTC has issued a second request in the US, and the EC has admitted a request for approval of the merger....

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