NEW YORK – Tapestry, the American owner of Coach, Kate Spade and other lifestyle brands, is acquiring Michael Kors’ parent company Capri for US$8.5 billion (S$11.5 billion), creating a new global fashion giant to compete with European powerhouses.

The unified company will include Tapestry’s Stuart Weitzman and Capri’s Jimmy Choo – both shoe powerhouses – as well as Versace, a go-to brand for Hollywood A-listers looking to make a splash on red carpets.

That will give Tapestry multiple brands marketed around shoes and handbags, as well as a strengthened apparel offering with Versace and Kors, also a celebrity favourite.

The merger “creates a new powerful global luxury house”, said Tapestry chief executive Joanne Crevoiserat.

The all-cash takeover aims to boost sales across an upscale portfolio by combining customer data streams, broadening geographic reach and achieving some US$200 million in annual cost savings within three years of the deal closing, a joint press statement said.

“We’ve created a dynamic, data-driven consumer engagement platform that has fuelled our success,” Ms Crevoiserat said.

“From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands.”

‘Patchwork of brands’

Mr Neil Saunders, managing director of consultancy GlobalData, said the transaction aims to enable Tapestry to benefit from a similar strategy to that employed by European powerhouses like LVMH, based around “a patchwork of brands appealing to different segments, rather than by making individual brands ubiquitous”.

While “there is a lot of logic behind the deal”, he called Capri’s price “hefty” and described the state of the Kors brand as a declining “mess”.

“Admittedly, Tapestry has plenty of experience reviving problem brands from its turnaround of Coach, which had become ubiquitous and sullied through constant discounting and promotions”, he said.

“Kate Spade was also in a similar position when Tapestry acquired it, and is now emerging in positive form from a successful reinvention. While the same thinking and playbook can be applied to Michael Kors, a turnaround will be far more complex and intricate.”

Tapestry will finance the deal through a combination of corporate bonds, bank loans and excess cash. It will suspend its share repurchase plan.

Shares of Capri surged more than 57 per cent to US$54.49 in early trading, while Tapestry dropped 5.8 per cent to US$38.83. AFP