Handbag retailers Coach Inc. and Kate Spade & Co. have agreed to tie their fortunes together, striking a $2.4 billion deal in which Coach will acquire Kate as the brands search for reinvigorated growth.
Coach will pay Kate Spade shareholders $18.50 a share in cash. That represents a 28% premium to Kate's closing price as of Dec. 27, the last trading day before a Wall Street Journal report that Kate was exploring a sale of the company after coming under pressure from an activist shareholder. The company confirmed it was reviewing such options in February.
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Coach Chief Executive Victor Luis said the companies hope the deal will "unlock Kate Spade's largely untapped global growth potential," and he described the deal as "an important step in Coach's evolution."
Coach has long been considered a good home for Kate Spade, given Coach's focus on handbags and accessories and its department-store presence. Coach also could help Kate expand abroad.
Both companies, based in New York, have battled a retail environment has been challenging, especially for designers that have significant exposure to department stores, where traffic has declined. U.S.-based luxury brands are also negatively affected by a strong U.S. dollar.
Kate Spade shares rose 8% to $16.97 in recent premarket trading. Coach shares were unchanged from their Friday closing price of $42.66.
The transaction, expected to close in the third quarter, is subject to the tender of a majority of the outstanding Kate Spade shares as well as regulatory approvals.
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(END) Dow Jones Newswires
May 08, 2017 07:43 ET (11:43 GMT)