US fashion accessories company Coach to buy Kate Spade for $2.4 bn
09 May 2017
US fashion accessories company Coach Inc today struck a deal to buy its smaller rival Kate Spade & Co for $2.4 billion in a bid to expand its luxury offerings to better compete with rivals.
New York City-based Coach has offered to pay $18.50 per share in cash, a premium of 27.5 per cent to Kate Spade's closing price on 27 December 2016, the last trading day prior to media reports of a transaction.
The transaction is not subject to a financing conditions. Coach has secured committed bridge financing from BofA Merrill Lynch.
Coach expects to fund the deal through a combination of senior notes, bank term loans and approximately $1.2 billion of its cash on hand, a portion of which will be used to repay an expected $800 million 6-month term loan.
The transaction is expected to close in the third quarter of 2017.
Coach said that the merger will create a leading luxury lifestyle company with a more diverse multi-brand portfolio supported by significant expertise in handbag design, merchandising, supply chain and retail operations as well as solid financial acumen.
Kate Spade operates under two global, multichannel lifestyle brands: kate spade new york and Jack Spade New York.
The company sells assortment of bags, sportswear and tailored clothing for women, men, children and home.
The Company also owns Adelington Design Group, a private brand jewelry design and development group.
Founded in 1941, Coach is a leading New York design house of modern luxury accessories and lifestyle brands.
Coach has approximately 1,000 stores in North America, besides boutiques located within select department stores. Internationally, the company sells its products through its own stores and through wholesale customers, in 25 countries.
The company has been struggling in recent years due to declining sales in North America and in Asia. Victor Luis, who took the reins of the company two years ago scaled back discounts and closed loss making outlets to improve the company's profitability.
In 2015, Coach acquired high-end footwear maker Stuart Weitzman Holding for $574 million. (See: US luxury handbag maker Coach buys shoe brand Stuart Weitzman for $574 mn)
Commenting on the Kate Spade acquisition, Victor Luis, CEO of Coach, Inc. said, ''Through this acquisition, we will create the first New York-based house of modern luxury lifestyle brands, defined by authentic, distinctive products and fashion innovation. In addition, we believe Coach's extensive experience in opening and operating specialty retail stores globally, and brand building in international markets, can unlock Kate Spade's largely untapped global growth potential.''
''Following a thorough review of strategic alternatives, reaching an agreement to join Coach's portfolio of global brands will maximize value for our shareholders and positions Kate Spade for long-term success as we continue our evolution into a powerful, global, multi-channel lifestyle brand,'' said, Craig Leavitt, CEO of Kate Spade.