FTC is gearing up to block the proposed merger of Coach parent Tapestry and Michael Kors parent Capri: NYT

By Ciara Linnane

FTC's five commissioners are due to meet next week to discuss the $8.5 billion deal

The Federal Trade Commission is gearing up to block the proposed merger of Tapestry Inc. and Capri Holdings, the New York Times Dealbook reported on Wednesday, citing two people with knowledge of the matter.

Tapestry (TPR), parent to the Coach and Kate Spade brands, announced last August its plan to acquire Capri Holdings Ltd. (CPRI), the parent company of Michael Kors, Jimmy Choo and Versace, in an all-cash deal valued at $8.5 billion.

The FTC's five commissioners are due to meet next week to discuss the case and could move to a formal vote on filing a lawsuit, the people told Dealbook. However, they could also opt not to do so, they said. The FTC declined to comment to MarketWatch.

The proposed deal comes as the luxury business struggles with demand amid a high inflationary environment. On Tuesday, French luxury-goods brand LVMH (FR:MC) reported a decline in first-quarter earnings, citing a slowdown in China, as well as macro and geopolitical concerns.

For more, read: LVMH weathers luxury market slowdown as fashion business bolsters sales

Tapestry was aiming to compete better with the likes of LVMH and to revive the Michael Kors brand, which Capri has been working to better position as a high-end one. The deal would be one of the biggest fashion-industry acquisitions in recent years.

The FTC has been reviewing the deal for months, even after regulators in the European Union and Japan have approved it, said Dealbook. It's also hard to argue monopoly cases in fashion as there's no shortage of labels.

But the regulator could argue that a deal combining Michael Kors and Coach would limit each brand's ability to compete on price. The FTC has been more aggressive in the current administration on mergers. In January, it put the kibosh on the merger between grocery-store chains Kroger Co. (KR) and Albertsons Cos. (ACI), on the grounds it would stifle competition, raise grocery prices and harm workers and product quality.

Capri's stock was down 0.2% and has fallen 22.5% in the year to date, while the S&P 500 SPX has gained 6%.

Tapestry was down 1% on Wednesday.

-Ciara Linnane

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04-17-24 1043ET

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