Coach-owner Tapestry agrees to $8.5B acquisition of Michael Kors parent

Investing.com -- Fashion house Tapestry (NYSE: TPR) has agreed to acquire Michael Kors-parent Capri Holdings (NYSE: CPRI) in a deal valued at about $8.5 billion, as the firms attempt to compete with their larger European counterparts.

In a joint statement, the companies said that Capri shareholders will receive $57 per share in cash, representing a premium of about 59% to the 30-day volume weighted average price on August 9. The firms added that they expect to realize over $200 million in cost synergies within three years after the deal is closed.

The purchase price is expected to be funded by a combination of senior notes, term loans, and excess Tapestry cash, the statement noted.

Along with Tapestry's high-end brands like Coach, Kate Spade, and Stuart Weitzman, the combined group will include Capri's luxury icons Jimmy Choo and Versace. Together, the businesses generated global annual sales of $12B and nearly $2B in adjusted operating profit in the prior fiscal year.

Both Tapestry and Capri have been moving to snap up fashion labels in recent years, although both have remained smaller than European giants LVMH (EPA: LVMH) and Kering (EPA: PRTP).

Shares in Capri surged by more than 57% in premarket U.S. trading on Thursday, while Tapestry shares fell.

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