Jamie McCarthy/Getty Images Entertainment
Capri Holdings (NYSE:CPRI) rose 1.9% on Friday ahead of a Federal Trade Commission closed-door meeting on Monday, where the regulator is reportedly expected to vote to suit to block its planned sale to Tapestry (NYSE:TPR).
Several news outlets reported on Wednesday that the FTC was preparing to file a lawsuit to challenge the $8.5 billion sale of Capri (CPRI) to Tapestry (TPR). Bloomberg reported that the FTC was expected to file the suit as soon as Monday.
Capri (CPRI) shares may have been moving as there were about 1,200 April $40 put calls that traded at $1.85 on Friday, traders told Seeking Alpha. Those put calls would have created about 100K shares to buy.
The FTC scheduled a closed-door meeting for Monday at 11am, without saying what the subject of the meeting is about.
The Capri/Tapestry deal received a request for more information from the FTC in November. Recent reports indicate that the FTC is said to be focused on whether the two are each other’s closest substitutes and if the deal may have an impact on jobs in the handbag industry.
On Monday, the European Commission approved the Capri (CPRI) deal. The transaction also received approval from Japan’s antitrust regulator last week, and the U.S. is the last regulator needed for the transaction to close.
Tapestry (TPR) in early August struck a deal to acquire Capri (CPRI) for $57.00 per share in cash. The deal will combine Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors.
A TD Cowen analyst on Wednesday wrote that Capri (CPRI) may see downside in the “high-teens” to low $20s a share if its planned sale to Tapestry (TPR) were to be terminated.
“If the transaction is blocked, CPRI could trade as low as the high-teens to low-$20s, although we believe investor consensus is ~$25, which implies a P/E of 5.5x and is in-line with the pre-deal valuation,” TD Cowen analyst Oliver Chen wrote in a note.
TD Cowen still believes that there’s an above 50% likelihood that the deal closes, which is more “constructive” than the implied 40-50%.
Tapestry (TPR) on Wednesday responded to reports about a potential FTC challenge.
“We have full confidence in the merits of this transaction and in our legal arguments, should we need to make them,” Tapestry said in a statement.
