Coach Announces It Is Buying Kate Spade In $2.4 Billion Deal

Owen Stevens
May 12, 2017

Kate Spade & Co (NYSE:KATE) shares are surging in the pre-market trading on Monday after the company revealed that it struck a deal with Coach Inc (NYSE:COH) to be acquired for $18.50 a share in cash.

Coach said Monday it has a definitive agreement to acquire its handbag rival Kate Spade for $18.50 a share, representing a 27.5 percent premium to the closing price of Kate Spade's shares on December 27, 2016.

New York-based Coach will be acquiring Kate Spade before 2017 ends, knocking out the brand as a competition.

[W] e believe Coach's extensive experience in opening and operating specialty retail stores globally, and brand building in worldwide markets, can unlock Kate Spade's largely untapped global growth potential.

Coach operates around 1,000 stores worldwide.

Coach has always been considered a good home for Kate Spade, given Coach's focus on handbags and accessories and its department-store presence.

Known for crisp color, graphic prints and playful sophistication, Kate Spade's handbags are popular among millennials for its sleek and modern design. Activist investor and major Kate Spade shareholder Caerus Investors sent a letter to the company's board in November of 2016 imploring the company to sell itself.

The deal comes after months of speculation that the two New York-based fashion brands would tie the knot.

Kate Spade stock had slid 30 percent in the past year through Friday's close. Coach shares rose almost five percent, with Kate Spade shares jumping by 8.2 percent.

To Reuters, Luis said: "Our strongest belief is that middle class will in Europe, in USA and especially in developing markets provide us tremendous opportunity".

Before anyone had a chance to voice their displeasure, Coach CEO Victor Luis noted that Kate Spade will remain an independent brand. These cost synergies will be achieved through operational efficiencies, improved scale and inventory management, and the optimisation of Kate Spade's supply chain network. In comparison, Coach generated sales of $4.5 billion.

Coach CFO Kevin Wills notes that once the acquisition is final, Coach will begin to implement many of its business strategies - which the company credits with turning around lackluster sales - at its smaller rival.

Coach is paying $18.50 per share for Kate Spade.

Other reports by VgToday

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