Tapestry: Capri Holdings (CPRI) announces termination of merger with TPR; TPR reaffirms FY25 guidance and approved an additional $2 billion share repurchase program (51.26)
- CPRI announced the mutual termination of its definitive merger agreement with Tapestry, Inc. Capri and Tapestry mutually agreed that terminating the merger agreement was in the best interests of both companies as the required closing condition of receiving necessary U.S. regulatory approvals was unlikely to be met by the merger agreement's outside date of February 10, 2025.
- The Company also announced its strategies to return to growth, which management will discuss on a call today at 11:00 a.m. ET. The Company will share more details of its strategies at an Investor Day in late February 2025.
- TPR announced the following:
- Given Tapestry's strong operational results, robust balance sheet, significant free cash flow generation, and outlook for growth, the Company is well-positioned to return meaningful capital to shareholders:
- Share Repurchase Program: The Company's Board of Directors has approved an additional $2 billion share repurchase program, which Tapestry expects to implement at least in part through an Accelerated Share Repurchase program. The Company intends to fund the repurchases through a combination of cash on hand and future issuance of debt. Together with the existing $800 million outstanding on the Company's prior authorization, there will be a total of $2.8 billion available for share repurchases over this fiscal year and beyond.
- Dividend: In Fiscal 2025, as previously announced, Tapestry expects to maintain its annual dividend rate of $1.40 per common share. Tapestry is committed to increasing its dividend at least in-line with earnings growth over time to achieve the stated target payout ratio of 35% to 40%.
- Capri and Tapestry mutually agreed that terminating the merger agreement at this time is in the best interest of both companies, as the outcome of the legal process is uncertain and unlikely to be resolved by the February 10, 2025 outside date.
- Based upon the termination of the merger agreement, the Company will redeem the senior notes associated with the planned acquisition totaling $6.1 billion in accordance with the Special Mandatory Redemption feature, for a price equal to 101% of their principal amount and accrued interest. There is no break fee associated with the transaction. Tapestry has agreed to reimburse Capri's expenses incurred in connection with the transaction of approximately $45 million.
- TPR reaffirms guidance for FY25 (Jun), sees EPS of $4.50 to $4.55 vs. $4.57 FactSet Consensus; sees FY25 (Jun) revs of over $6.75 bln vs. $6.77 bln FactSet Consensus.
- Tapestry, Inc.'s Chief Financial Officer and Chief Operating Officer, Scott Roe, said, "Tapestry's steadfast commitment to deliver meaningful shareholder value is unchanged. Our strong and consistent cash flow underpins our foundational commitments to invest in our brands and business as well as fund our dividend program. Further, today's additional $2 billion share repurchase authorization highlights the strength and flexibility of our balance sheet to unlock incremental value, while maintaining our firm commitment to a solid investment grade rating. We are confident in our compelling long-term organic growth agenda and the opportunity to deliver enhanced value to all stakeholders for years to come."