01—Abstract
Summary
Summary of the 8-K filed November 14, 2024. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (NYSE: TPR) announced on November 14, 2024 that it has terminated its Agreement and Plan of Merger with Capri Holdings Limited under a Termination Agreement dated November 13, 2024.
The parties cited that the outcome of the legal process is uncertain and unlikely to be resolved by the February 10, 2025 outside date. Tapestry will reimburse Capri's expenses of $45,088,675a in cash on November 14, 2024, and the parties have released each other from claims related to the merger. The Company's term loan agreement with Bank of America was also terminated concurrently.
To fund the deal, Tapestry is required to redeem all of its outstanding acquisition-related notes, which the press release describes as totaling $6.1 billionb, at 101% of principal plus accrued interest, with redemption expected on or about November 25, 2024. The Company expects to fund the redemption with cash on hand. It expects to recognize in the second fiscal quarter of 2024 approximately $57.1 million of unamortized cash flow hedge losses, debt issuance costs and discounts, plus an approximately $61.1 million redemption premium, on a pre-tax basis.
Tapestry's Board also authorized a new $2.0 billionc share repurchase program, which the Company intends to launch partly as an accelerated share repurchase in the coming weeks, funded by cash on hand and new debt. This is in addition to the $800 million remaining under the May 2022 authorization, for a total of $2.8 billion. The company reaffirmed its Fiscal 2025 outlook issued on November 7, 2024, and stated it expects to maintain its $1.40 annual dividend rate per share, with its next earnings update scheduled for February 6, 2025.
02—Key points
Key Highlights
- Termination of the Capri Holdings merger agreement by mutual agreement, with Tapestry paying Capri's expenses of $45,088,675 and no break fee cited in the press release.
- Mandatory redemption of acquisition-related senior notes totaling $6.1 billion at 101% of principal plus accrued interest, expected on or about November 25, 2024.
- Pre-tax charge expected in the second fiscal quarter of 2024 of approximately $57.1 million for unamortized hedge losses and debt costs, plus approximately $61.1 million in redemption premium.
- New $2.0 billion share repurchase authorization, with an accelerated share repurchase program planned in the coming weeks.
- Total available for share repurchases of $2.8 billion including the $800 million remaining under the May 2022 program.
- Fiscal 2025 outlook reaffirmed, with the annual dividend rate of $1.40 per share expected to be maintained.
- Company states it does not expect any acquisitions in the near term and maintains a leverage target below 2.5x gross debt to adjusted EBITDA.
03—Questions
Frequently Asked Questions
Why did Tapestry and Capri terminate the merger agreement?
According to the press release, the parties 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.
Does Tapestry have to pay a fee to Capri?
Tapestry agreed to reimburse Capri for its expenses in the amount of $45,088,675 in cash on November 14, 2024. The press release states there is no break fee associated with the transaction.
How will the redemption of the acquisition-related notes be funded and what will it cost?
The Company expects to fund the redemption with cash on hand. The notes will be redeemed at 101% of principal plus accrued and unpaid interest, and the Company expects to recognize approximately $57.1 million in unamortized hedge losses and debt costs plus approximately $61.1 million in redemption premium, pre-tax, in its second fiscal quarter of 2024.
How much capital is available for share repurchases and how will the buyback be funded?
The Board authorized a new $2.0 billion repurchase program, supplemental to the $800 million remaining under the May 2022 authorization, for a total of $2.8 billion. The Company intends to launch an accelerated share repurchase in the coming weeks and expects to fund it with cash on hand and proceeds from debt, which may include revolving credit facility borrowings, a new term loan or new debt issuance.
Will the dividend and financial outlook change?
Tapestry expects to maintain its annual dividend rate of $1.40 per common share in Fiscal 2025 and reaffirmed its Fiscal 2025 outlook issued on November 7, 2024. The Company will update its outlook at its next earnings announcement scheduled for February 6, 2025.
04—Continue