USA fashion luxury goods group Capri Holdings (CPRI.US) and Tapestry (TPR.US) have agreed to terminate their $8.5 billion merger deal.

Both companies stated in a declaration: "Capri and Tapestry have mutually agreed that terminating the merger agreement at this time is in the best interest of both companies, as the outcome of legal proceedings remains uncertain and is unlikely to be resolved before February 10, 2025."

Tapestry reached an agreement in August last year to acquire Capri for $57.00 per share in cash.

A federal judge blocked the transaction on antitrust grounds, leading to regulatory hurdles for the deal. U.S. District Judge Jennifer Rock approved the Federal Trade Commission's (FTC) motion for a preliminary injunction to halt the transaction.

The Federal Trade Commission of the USA filed a lawsuit in April to block the deal, arguing that the merger would eliminate competition among Coach, Kate Spade, and Michael Kors, particularly in the "affordable luxury goods" market.

Tapestry and Capri argued at the time that the Commission's definition of the market for "affordable luxury goods" was not relevant, as handbag retailers have been competing with hundreds of other handbag manufacturers and new entrants.

No default penalty will be charged for this trade. Tapestry has agreed to repay Capri about 45 million US dollars in expenses related to this transaction.

Tapestry has also announced an additional $2 billion share buyback authorization, including a planned accelerated share repurchase program. The fashion company also expects to maintain an annual dividend yield of $1.40 per share in fiscal year 2025, and anticipates no immediate acquisitions.

The company intends to redeem the senior notes related to the planned sale at a price equivalent to 101% of the principal and accrued interest, totaling $6.1 billion.