US premium accessories giant Coach has confirmed the acquisition of Kate Spade for a total transaction value of $2.4bn.
Coach has been seen as the favourite to acquire its fellow US premium lifestyle and accessories brand since it was officially put on the market in February following speculation it was considering a sale at the end of last year.
At $18.50 per share Coach paid a premium of 27% to the unaffected closing price of Kate Spade’s shares as of 27 December 2016, which was the last trading day prior to media speculation of a transaction.
Coach CEO Victor Luis, who has been positioning Coach as brand group since its acquisition of footwear brand Stuart Weitzman, said: “Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials. 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. We are confident that this combination will strengthen our overall platform and provide an additional vehicle for driving long-term, sustainable growth,” he added.
Kate Spade CEO Craig A Leavitt said that following a review of its strategic options, the deal with Coach would “maximize value for our shareholders and positions Kate Spade for long-term success”. “We look forward to working with Coach’s leadership team to leverage their expertise across the business as we continue to innovate and build long-term loyalty with consumers and expand across our product category and geographic axes of growth,” he added.
Coach CFO Kevin Wills said that due to the complementary nature of the businesses he expected to be able to make significant synergistic cost savings 0f around $50m in the coming three years and, as Coach has done, it would be shaking up Kate Spade’s wholesale base and pulling back on promotional activity.
“[…] cost synergies will be realised through operational efficiencies, improved scale and inventory management, and the optimization of Kate Spade’s supply chain network. At the same time, to ensure the long-term viability and health of the Kate Spade brand, and similar to the steps Coach has itself taken over the last three years, we plan to reduce sales in Kate Spade’s wholesale disposition and online flash sales channels,” Will said.
Coach has also been linked to a possible purchase of UK luxury footwear and accessories brand Jimmy Choo which was recently put up for sales by its owner JAB Luxury.