2024-07-09 14:43:31 ET
Summary
- Capri Holdings represents a great investment at $33.55 per share.
- Tapestry offered to acquire Capri for $57 per share, a 70% premium.
- The FTC's case against the merger is weak, in my view, and Capri's brands could be sold for billions even if the deal falls through.
Overview
Capri Holdings ( CPRI ), which owns the Michael Kors, Jimmy Choo, and Versace brands, represents a great investment at today’s price of $33.55 per share. In August 2023, Tapestry (TPR), which owns the Coach, Kate Spade, and Stuart Weitzman brands, made an offer to acquire CPRI for $57 per share, or a 70% premium to Capri’s current share price. While the FTC has sued to block this merger (more on this later), even if the deal does not go through, Capri’s current share price offers meaningful downside protection. Given the valuation multiples iconic global brands have been sold for historically, Jimmy Choo and Versace could be sold for $3-$4 billion conservatively. This would leave the remaining Michael Kors business, though in decline (more on this too), valued at a very low multiple. I believe the FTC’s case is weak and will walk through several reasons why, however, let’s take care of the downside first.
At $33.55/share CPRI has a market value of ~$3.93 billion and an enterprise value of $5.45 billion. Over the last 12 months, Michael Kors, Jimmy Choo, and Versace generated revenue of $3.52 billion, $618 million, and $1.03 billion, respectively....
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Capri Holdings Is An Attractive Investment