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Coach to acquire handbag company Kate Spade for $2.4bn

RBR Staff Writer Published 09 May 2017

American handbag maker Coach has agreed to acquire its rival fashion design house, Kate Spade & Company for $2.4bn to create a major New York-based luxury lifestyle firm.

The combined entities are expected to have a more diverse portfolio featuring multiple brands.

Coach hopes to realize about $50m in synergies within three years of the closing of the deal, owing to the complementary nature of Kate Spade, said the company’s chief financial officer Kevin Wills.

The Coach-Kate Spade merger is expected to be backed by considerable expertise in handbag design, merchandising, retail operations, and supply chain along with robust financial acumen.

Coach CEO Victor Luis said that Kate Spade has a unique and differentiated brand positioning with a wide lifestyle inventory and strong awareness among consumers, particularly the millennials.

Luis added: “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.”

Coach stated that it will preserve the brand independence of Kate Spade. Besides, it will retain key talent in Kate Spade to ensure a smooth transition to its ownership.

Under the transaction terms, the shareholders of Kate Spade will be paid $18.50 for each of their shares in cash. The transaction has been cleared unanimously by the board of directors of the two luxury lifestyle companies.

Kate Spade & Company CEO Craig A. Leavitt said: “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.”

Subject to customary closing conditions and receipt of mandatory regulatory approvals, the transaction is estimated to be closed in the third quarter of this year.

Image: Inside a Coach store in San Francisco, California. Photo: courtesy of Fashionmouse/Wikipedia.org.