The merger “creates a new powerful global luxury house”, said Tapestry chief executive Joanne Crevoiserat.

The all-cash takeover aims to boost sales by combining customer data streams, broadening geographic reach and achieving some US$200 million in annual cost savings within three years of the deal closing, a joint press release said.

Executives highlighted Tapestry’s superior direct-to-consumer business as an area of potential growth for Capri, which garners more sales in Europe compared with Tapestry, which is stronger in Asia.

CFRA Research analyst Zachary Warring described Capri’s brands as “maybe half a step up” on the luxury scale from Tapestry’s, with a slightly wealthier customer profile. The 59 per cent premium paid on Capri shares constitutes a “solid price”, but Warring cautioned that it could be “at least three to five years before you start to see real gains” at Tapestry, whose shares fell sharply.

Warring said Tapestry may ultimately divest one of the noncore brands to accelerate debt repayment. The deal is expected to close in 2024.

While “there is a lot of logic behind the deal”, Saunders called Capri’s price “hefty” and described the state of the Michael Kors brand as a declining “mess”.

“Admittedly, Tapestry has plenty of experience of reviving problem brands from its turnaround of Coach, which had become ubiquitous and sullied through constant discounting and promotions,” Saunders said.

“Kate Spade was also in a similar position when Tapestry acquired it, and is now emerging in positive form from a successful reinvention. While the same thinking and playbook can be applied to Michael Kors, a turnaround will be far more complex and intricate.”

Crevoiserat described Kors as “a strong brand with strong consumer resonance and awareness across customer demographics”, adding that its customer base “skews slightly younger and more diverse”.

“We will work on improving the brand experience,” Crevoiserat said.

Tapestry will finance the deal through a combination of corporate bonds, bank loans and excess cash. Tapestry will suspend its share repurchase plan. Shares of Capri surged more than 55 per cent to US$53.90, while Tapestry plunged nearly 16 per cent to US$34.67.