Coach snags handbag rival Kate Spade in $2.4 billion deal

In an effort to resonate more with younger consumers, handbag maker Coach is buying its smaller rival, Kate Spade & Co., for a $2.4 billion price tag, the companies announced on Monday.

“Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials,” Coach CEO Victor Luis said in a statement.

The $18.50 per share cash offer represents a premium of 9 percent to Kate Spade’s closing price on Friday.

The deal is expected to close in the third quarter of 2017 and add to adjusted earnings in fiscal 2018, Coach added.

Shares of Kate Spade jumped more than 8 percent higher in premarket trading Monday following this announcement.

Just last week, Coach reported better-than-expected earnings for its third quarter, hinting that the retailer’s strategy to cut back on discounting products in the U.S. is starting to pay off.

M&A rumors had already stirring at the time, with reports surfacing that in addition to Kate Spade, Coach was considering an acquisition of luxury shoe manufacturer Jimmy Choo.

Coach also recently inked a deal with celebrity fashion icon Selena Gomez, who will appear in the brand’s ad campaigns beginning in the fall of 2017 and across all of Coach’s social media channels.

Twenty-four-year-old Gomez is known for her enormous following on social media — particularly by millennials — where she boasts more than 47 million followers on Twitter and is the most-followed individual on Instagram.

“On Selena, we’re really pleased … with our partnership so far,” CEO Luis said on last week’s earnings conference call. “It’s in its very, very early stages.”

“We have a full year ahead really of activities and advertising that will hit, featuring Selena and, of course, leveraging her very, very extensive online following,” Luis added.

As of Friday’s close, shares of Coach have risen nearly 7 percent over the past 12 months and are up about 22 percent for the year-to-date period.

—Reuters contributed to this report.

This entry was posted in Retail. Bookmark the permalink.

Leave a Reply