Tuesday, May 9, 2017
Coach to buy rival handbag maker Kate Spade for $2.4-B
Handbag and accessory maker Coach reached a deal to acquire rival Kate Spade for $2.4 billion, the companies announced.
The agreement will boost the marketing opportunities for both luxury New York-based designers of handbags, shoes and various accessories, the companies said, at a time when sales are declining at department stores where they have sold their goods.
By combining, they expect to save about $50 million a year in inventory management and other operational efficiencies, the companies said a joint press release announcing the deal.
Coach chief executive Victor Luis said the acquisition would boost the firm's prospects with millennials. In December, Coach, which dates to 1941, announced a marketing partnership with actress and singer Selena Gomez, in an effort to woo this key demographic group.
"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," Luis said.
Kate Spade chief Craig Leavitt said the company, which was launched in the 1990s, now will be positioned "for long-term success as we continue our evolution into a powerful, global, multi-channel lifestyle brand."
Under the transaction, Kate Spade shareholders will receive $18.50 in cash, a 27.5 percent premium on the price prior to media speculation about a takeover of the company.
Shares of Kate Spade rose 8.1 percent to $18.34 in morning trading, while Coach gained 6.4 percent to $45.39.