A Versace and Jimmy Choo IPO?
That was among the roads not taken for Capri Holdings before the company agreed to a buyout from Tapestry Inc.
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Details of how the blockbuster deal came together were revealed in a regulatory filing from Capri late Friday, offering a behind-the-scenes look at chief executive officer John Idol’s busy schedule and discussions with other interested parties as the deal came together.
The wheels were already turning in Capri’s boardroom when Joanne Crevoiserat, CEO of Tapestry, reached out to Idol on March 20 — then followed up 10 days later requesting a meeting to “discuss a topic of strategic importance.”
Five months earlier, Capri’s board met with investment bankers from Barclays and “reviewed certain potential strategic alternatives,” including a sale of Capri, an initial public offering of equity interests in a holding company owning Versace and Jimmy Choo and an outright sale of the two luxury brands.
Barclays said there were only a “limited number” of potential buyers for Capri and that there would likely be “less strategic interest in acquiring” Versace and Jimmy Choo together.
So the company explored the possibility of an IPO for the two brands.
By the end of January, the board had determined that a spin-off could be “value-enhancing at the appropriate time, but not at that time” and shelved the idea with plans to revisit it later, maintaining the status quo.
While boards are legally bound to look after the interests of shareholders and to regularly consider all kinds of options, it is clear that Capri was looking hard at the future and contemplating big moves as a spin-off of Versace and Jimmy Choo would essentially dismantle the fashion group Idol built around Michael Kors.
When Crevoiserat came calling — twice — and finally met with Idol, she offered an all-cash buyout at $60 a share.
But Capri played coy, or stalled or just bought itself some time and told Tapestry on April 11 that it would wait until after reviewing its 2024 budget before making any decision.
Meanwhile, Idol was out making connections, keeping the company’s options open — particularly with a pair of meetings on May 1.
One was with the “chairman and chief executive officer of a multi-industry holding company” identified as Company A. The two discussed either an acquisition of both Versace and Jimmy Choo or a potential investment in their IPO.
The other was with “the chairman and chief executive officer of an international luxury goods company,” or Company B, who wanted to pick up “prior conversations” about buying both Versace and Jimmy Choo.
Taking all this into account, Capri’s board decided a buyout would be “more value-enhancing” and told Tapestry that it was open to letting the suitor get a closer look at its books, but that it would need to “improve its offer above $60” a share.
In turn, Tapestry said it would need to get a closer look to raise its price.
But soon, Capri’s hand started to weaken. On May 31, the company reported a 10.5 percent drop in fourth-quarter revenues and saw its stock price fall 10.3 percent that day.
The next week, Capri reached out to see if Tapesty’s offer was “still outstanding” — it was, but the company said it needed to do more due diligence. Idol also met again with the CEO of the multi-industry holding company to discuss some kind of a deal tied to Versace and Jimmy Choo and ultimately agreed just to meet again (they did eventually, but the CEO’s interest was in the two brands and nothing more than a minority stake in Capri itself).
By June 13, Capri and Tapestry were under a confidentiality agreement, but the price was not locked in.
In late July, Crevoiserat revised the offer to $54 a share and Capri started pushing back.
A new player briefly entered the scene as Idol met with the CEO of a luxury fashion house, Company C, who was interested in buying a stake in Versace and Jimmy Choo.
But Idol and Crevoiserat talked on July 30 and settled on $57 a share as the price they would recommend to their respective boards.
And that was the price when the deal was announced and signed Aug. 10.
That valued all of Capri’s stock at $6.6 billion — almost $350 million less than the initial offer of $60 a share would have netted.
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