Tapestry, Inc. TPR shares are trading higher premarket on Thursday after the company disclosed that it has reached an agreement with Capri Holdings Limited CPRI to terminate their merger agreement.
The companies mutually agreed to terminate their merger agreement, citing uncertainty in the legal process and the likelihood that it would not be resolved by the February 10, 2025 outside date.
Following the termination of the merger agreement, Tapestry will redeem $6.1 billion in senior notes tied to the acquisition, paying 101% of their principal amount plus accrued interest, as per the Special Mandatory Redemption clause.
There is no break fee. Tapestry will also reimburse Capri $45 million for transaction-related expenses.
Recently, a judge blocked the acquisition by Tapestry, which the companies planned to appeal the ruling.
In April, the Federal Trade Commission filed a lawsuit aiming to halt Tapestry’s $8.5 billion purchase of Capri Holdings.
Buyback: Tapestry’s Board of Directors approved a $2 billion share repurchase program, to be funded through a mix of cash on hand and future debt issuance.
This, along with the remaining $800 million from the prior authorization, provides $2.8 billion for repurchases in fiscal 2025 and beyond.
To fund its share repurchase program, Tapestry plans to issue debt while keeping its long-term leverage target below 2.5x gross debt to adjusted EBITDA.
Dividend: Tapestry plans to maintain its annual dividend of $1.40 per share and aims to grow dividends in line with earnings, targeting a payout ratio of 35% to 40%.
FY25 Outlook Reaffirmed: Tapestry reiterated guidance for revenue at over $6.75 billion (vs. consensus of $6.76 billion) and EPS of $4.50 to $4.55.
The company will update its outlook at its next earnings announcement on February 6, 2025.
Meanwhile, Capri Holdings, the fashion luxury group consisting of brands Versace, Jimmy Choo and Michael Kors, also announced its strategies to return to growth, which its management will discuss on a call today. The company will share more details of its strategies at an Investor Day in late February 2025. Capri expects Michael Kors store fleet to be reduced to approximately 650 stores over time.
Investors can gain exposure to the TPR stock via KraneShares Trust KraneShares Global Luxury Index ETF KLXY and Invesco S&P 500 Equal Weight Consumer Discretionary ETF RSPD.
Price Action: TPR shares are up 8.25% at $54.49, while CPRI is down 5.60% at $18.54 premarket at the last check Thursday.
Image via Pexels
Read Next:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
