Coach Acquires Kate Spade for $2.4 Billion

Coach has announced that it will acquire Kate Spade for $2.4 billion after rumors of a deal began circulating in January.

According to an article on Reuters, Coach has announced that it will acquire Kate Spade for $2.4 billion. The deal comes a few months after rumors began circulating that the brand and Michael Kors were both interested in acquiring Kate Spade.

Kate Spade shareholders will receive $18.50 per share in cash. The brand’s offer is 27.5% more than what Kate Spade’s shares were before reports began circulating that the company was going to sell itself. The offer is also 9% more than its last closing price.

The $2.4 billion purchase price is expected to be funded half in cash and half in debt. The deal is not subject to any financing conditions. The deal is expected to close in the third quarter fiscal 2017 and increase adjusted earnings in fiscal 2018.

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Coach CEO Victor Luis released a statement saying,

Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials. 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. We are confident that this combination will strengthen our overall platform and provide an additional vehicle for driving long-term, sustainable growth.

He continued to say,

The acquisition of Kate Spade is an important step in Coach’s evolution as a customer-focused, multi-brand organization. The combination enhances our position in the attractive global premium handbag and accessories, footwear and outerwear categories, bringing product, brand positioning and customer diversification to the portfolio, and establishing scale in key functions with the resources to invest in talent and innovation. In addition, we believe the Kate Spade brand will benefit from our best-in-class supply chain and strong corporate infrastructure.

In December, Kate Spade was said to be in talks with investment banks about selling the company.

A couple of months later in February, rumors began circulating that Coach and Michael Kors were interest in acquiring the brand. The two brands were said to be in talks with their boards about possibly offering a bid. It was said, however, that the talks were still being held and no final decisions had been made.

Kate Spade was also said to be holding a formal auction that same month. The brand didn’t have one but rumors kept circulating that it would sell.

In March, rumors began circulating that Coach would announce the acquisition of Kate Spade. Analysts had speculated that the brand would be purchased for as much as $2 billion.

Coach has also been looking to buy brands as it tries to increase sale and profits. Last week it was said the brand may offer a bid to acquire Jimmy Choo. In December, the brand made several bids to buy Burberry but was rejected. The brand also acquired Stuart Weitzman a couple of years ago for $574 million.

Kate Spade, is expected to increase Coach’s earnings in fiscal 2018 but sales at the brand have declined. The brand reported decline sales in late 2016 and said earnings would decline during the holiday season. Also, Kate Spade hasn’t been very popular for a while. The brand would need to not only make its handbags better but get people to buy them to increase sales and profits.

So, what do you think? Will Coach’s sales and profits increase? Let me know in the comments below. Also, don’t forget to subscribe to get new posts sent directly to you inbox and follow me on Facebook, Instagram, and Snapchat.


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