06:31 AM EDT, 10/25/2024 (MT Newswires) -- Capri (CPRI) shares plunged early Friday following a court ruling that temporarily blocked the luxury fashion company's proposed acquisition by Coach and Kate Spade owner Tapestry (TPR).

The US District Court for the Southern District of New York on Thursday approved the Federal Trade Commission's motion for a preliminary injunction against the deal amid concerns it would reduce competition in the market for "accessible luxury" handbags and unfairly lift prices. Capri's stock fell 48% in recent premarket activity, while Tapestry advanced 14%.

"The court finds that the merging parties are close competitors, such that the merger would result in the loss of head-to-head competition," according to the court filing. "There is persuasive additional evidence of unilateral effects of the merger causing anticompetitive harm."

In August 2023, Tapestry agreed to acquire Michael Kors and Versace parent company Capri in a deal worth $8.5 billion to establish a global luxury and fashion brand. At the time, the companies said they expected to complete the transaction in 2024, subject to approval from regulators.

The FTC in April issued an administrative complaint and authorized a lawsuit in federal court to block the planned deal. The regulator claimed the merger would eliminate competition between the two entities' brands and give Tapestry a dominant share of the accessible luxury handbag market.

"Today's decision granting the FTC's request for a preliminary injunction is disappointing and, we believe, incorrect on the law and the facts," Tapestry said in a separate statement. Both companies are operating in an industry that is "intensely competitive and dynamic," according to Tapestry, which intends to appeal the ruling.

"We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer," Tapestry said. In a separate statement, Capri said it plans to file a joint notice of appeal with Tapestry to the US Court of Appeals for the Second Circuit over the District Court's decision.

The FTC didn't immediately respond to a request for comment by MT Newswires on the matter.

Price: 22.14, Change: -19.46, Percent Change: -46.78