Shares of Kate Spade & Co. jumped 9.9% in premarket trade Monday, after the apparel and accessories company agreed to be acquired by Coach Inc. in a deal valued at $2.4 billion. Under terms of the deal, Coach will pay $18.50 in cash for each Kate Spade share outstanding, which represents a 9.0% premium to Friday's closing price. Coach said it expects the deal to add to fiscal 2018 adjusted earnings, and expects $50 million in synergies. Coach said the deal, which it believes will close in the third quarter, will be funded by $1.2 billion in excess cash and senior notes and bank term loans. "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," said Kate Spade Chief Executive Craig Leavitt. Kate Spade's stock has tumbled 9.1% year to date through Friday, while Coach shares have soared 22% and the S&P 500 has gained 7.2%.
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