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.

Capri Holdings Ltd and Tapestry Inc. scrapped their $8.5 billion plan to merge after a court order froze the proposed combination of the US fashion companies due to antitrust regulators’ objections.Tapestry,

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 losing a lawsuit against the FTC, both companies agreed to cancel the deal, calling the legal process “uncertain and unlikely to be resolved.”

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.

Shares of Coach and Kate Spade parent Tapestry jumped Thursday morning while those of Michael Kors and Versace owner Capri Holdings fell after they called off their planned merger over ongoing legal challenges.

Now Capri is pressing forward with a revamp that will include store closures and a marketing push for its Michael Kors brand.

Tapestry, Inc. (NYSE:TPR) shares are trading higher premarket on Thursday after the company disclosed that it has reached an agreement with Capri Holdings Limited (NYSE:CPRI) to terminate their merger agreement.

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.