On August 10, 2023, we entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among us, Capri and Sunrise Merger Sub, Inc. ("Merger Sub"), pursuant to which we agreed to acquire any and all of Capri’s ordinary shares (other than (a) Capri’s ordinary shares that are issued and outstanding immediately prior to the consummation of the acquisition that are owned or held in treasury by us or by Capri or any of its direct or indirect subsidiaries and (b) Capri’s ordinary shares that are issued and outstanding immediately prior to the consummation of the acquisition that are held by holders who have properly exercised dissenters’ rights in accordance with, and who have complied with, Section 179 of the BVI Business Companies Act, 2004 (as amended) of the British Virgin Islands) in cash at a purchase price of $57.00 per share, without interest, subject to any required tax (the "Capri Acquisition"). The consummation of the Capri Acquisition remains subject to the receipt of certain regulatory approvals and the satisfaction of certain closing conditions. Subject to limited exceptions, we or Capri may terminate the Merger Agreement if the Capri Acquisition is not consummated on or before August 10, 2024, subject to two extensions of up to three months each in certain circumstances, including to obtain required regulatory approvals.
On April 22, 2024, the Federal Trade Commission ("FTC") filed a preliminary injunction action against Tapestry and Capri in the United States District Court for the Southern District of New York seeking to enjoin the consummation of the Capri Acquisition. The FTC’s action alleges that the Capri Acquisition, if consummated, would violate Section 7 of the Clayton Act and that the Merger Agreement and the Capri Acquisition constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined.
There can be no assurance as to the outcome of litigation with the FTC or that we will receive regulatory approval from the FTC on a timely basis or at all, and there can be no assurance that if regulatory clearance is obtained, it will not be subject to the compliance of certain conditions or impose limitations, obligations or restrictions that could have the direct or indirect effect of delaying or preventing the completion of the Capri Acquisition, imposing additional material costs on or materially limiting our revenues following the Capri Acquisition or otherwise reducing the anticipated benefits of the Capri Acquisition, or resulting in the abandonment of the Capri Acquisition.
If the Capri Acquisition is not completed on a timely basis or at all, our ongoing business may be adversely affected as follows:
- we may experience negative reactions from the financial markets, including investors and rating agencies, and the price of our common stock could decline;
- we have incurred, and will continue to incur, significant costs, expenses and fees, in connection with the Capri Acquisition and the transactions contemplated by the Capri Acquisition, for which we may receive little or no benefit if the Capri Acquisition is not completed, including in connection with the issuance and mandatory redemption of $4.50 billion of Capri Acquisition USD Senior Notes and €1.50 billion of Capri Acquisition EUR Senior Notes (both as defined below) at 101% of par value if the Capri Acquisition is not completed by February 10, 2025 (or such later date mutually agreed between us and Capri);
- investor and consumer confidence in our business could decline, relationships with vendors, service providers, investors and other third parties may be adversely impacted, and we may be unable to retain key personnel;
- we may be subject to litigation, which could result in significant costs and expenses;
- management’s focus may be diverted from day-to-day business operations and pursuing other opportunities that could have been beneficial to us; and
- the anticipated benefits of the Capri Acquisition could be delayed or reduced.