Key Takeaways The stocks of Tapestry and Capri Holdings moved in opposite directions Thursday after the brands called off a planned merger.Tapestry, which owns Coach and Kate Spade, said it will shift its capital to an expanded stock buyback program.

Tapestry is terminating its $8.5 billion deal to buy Michael Kors-owner Capri following a legal hurdle, the companies said on Thursday, ending their effort to create a U.S. luxury giant to compete with major European players.

Fashion group Tapestry said Thursday that it was dropping its $8.5 billion bid for Capri, the owner of luxury brands including Michael Kors and Versace, following a successful legal challenge by US regulators.

Fashion companies Capri Holdings Limited and Tapestry -- parent companies behind the Coach and Michael Kors brands -- ended their $8.5 billion merger deal Thursday. The deal was blocked by the Federal Trade Commission.

After the US Federal Trade Commission halted the sale, stating that it would eliminate direct competition in the mid-tier handbag market.

The proposed merger that would've combined six luxury brands owned by Capri and Tapestry was abandoned by the companies due to regulatory challenges posed by an FTC lawsuit.

Tapestry said on Thursday it was terminating its $8.5 billion deal for Michael Kors owner Capri after the deal was blocked by a U.S. judge. Shares of Tapestry were up 5% in premarket trading, while those of Capri were down 3%.