Tapestry Inc: Tapestry, Inc. is an American multinational luxury fashion holding company.

It is based
in New York City and is the parent company of three major brands: Coach New York, Kate Spade
New York and Stuart Weitzman. The company's product portfolio includes ready to wear, outerwear,
hats, gloves, bags, small leather goods, wallets, footwear, jewelry, home decor, business cases,
eyewear, travel bags, watches and other lifestyle products.

Extra: Each of their brands are unique and independent, while sharing a commitment to innovation
and authenticity defined by distinctive products and differentiated customer experiences across
channels and geographies. They use their collective strengths to move customers and empower
communities, to make the fashion industry more sustainable, and to build a company that’s equitable,
inclusive, and diverse.

Capri Holdings: Capri Holdings Limited is a multinational fashion holding company, incorporated in
the British Virgin Islands, with executive offices in London and operational offices in New York. It is
a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and
Michael Kors. The company sells clothes, shoes, watches, handbags, and other accessories.

Key Info:

Announced: Aug-10-2023
Closed: Q1-2024 (anticipated)
Transaction value: $8.5 billion (all cash)
Acquirer Financial Advisor(s): Morgan Stanley & Co LLC
Target Financial Advisor(s): Barclays

Transaction Summary: As part of Tapestry’s acquisition of Capri Holdings, shareholders of Capri

Holdings will receive $57.00 per share in cash for a total enterprise value of approximately $8.5
billion. The notable factor in this acquisition is that it brings together six brands with strong global
reach: Coach New York, Spade New York, Stuart Weitzman, Versace, Jimmy Choo and Michael Kors.
This will be powered by Tapestry’s data-rich customer engagement platform and diversified, direct-to-
consumer operating model. In the prior fiscal year, the combined company generated global annual
sales in excess of $12 billion with a presence in approximately 75 countries and achieved nearly $2
billion in adjusted operating profit.

Strategic rationale: This acquisition builds on Tapestry’s principles as consumer-centric brand

builders and disciplined operators, accelerating its strategic and financial growth agenda. Ultimately,
it leverages Tapestry’s consumer engagement platform to drive direct-to-consumer opportunity.

Financial Analysis: There is a premium of approximately 59% to the 30-day volume weighted
average price (ending August 2023), represented by the all cash offer of $57 per share as part of this
acquisition. The total enterprise value of the transaction (approximately $8.5 billion) further
represents a 9x adjusted EBITDA multiple on a trailing twelve-month basis. Also, this transaction is
not subject to a financing condition. Tapestry has secured $8.0 billion in fully committed bridge
financing from Bank of America N.A. and Morgan Stanley Senior Funding, Inc. The purchase price of
approximately $8.5 billion is expected to be funded by a combination of senior notes, term loans, and
excess Tapestry cash, a portion of which will be used to pay certain of Capri’s existing outstanding
debt.

Global Expansion: For Tapestry, the deal presents an opportunity to expand its portfolio reach and
diversification cross consumer segments, geographies and product categories. The deal establishes a
powerhouse of iconic luxury and fashion brands across consumer segments globally. It extends global
reach and geographic diversification given the Tapestry and Capri Holdings highgly complementary
respective positions in Asia and Europe.
Outlook and risks: A key facet of this deal is that it leverages Tapestry’s customer engagement
platform to drive direct-to-consumer opportunity. Therefore, it creates an opportunity to further
leverage Tapestry’s proven and profitable model with the goal of increasing Capri Holdings’ direct-to-
consumer penetration over time. The deal also creates a path to deliver enhanced total shareholder
returns. The deal is expected to deliver significant financial returns, including strong double-digit EPS
accretion on an adjusted basis and compelling ROIC. Furthermore, its continued commitment to
capital return with Tapestry’s Board of Directors approving a 17% increase to its quarterly dividend
per share, will result in an anticipated pay-out of $1.40 per share or approximately $325 million in
2024.

However, a key risk is that especially with regards to Tapestry’s brands, there is a greater focus on
catering towards the ‘affordable luxury’ market than its rivals. Consequently, shoppers in this market
are more vulnerable to the increasing cost of living, making the category more at risk as rising costs
and inflation continue to impact consumer’s shopping habits.