Coach to Buy Kate Spade for $2.4 Billion -- Update
08 Maggio 2017 - 2:22PM
Dow Jones News
By Joshua Jamerson
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.
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.
Sales at Coach have started to grow again as it pulled back from
department stores and dialed back promotions. The company said it
plans to do the same for Kate Spade after the deal closes, which is
expected to occur in the third quarter.
Kate Spade shares rose 8.5% to $18.41 in recent premarket
trading. Coach shares were unchanged from their Friday closing
price of $42.66.
The transaction is subject to the tender of a majority of the
outstanding Kate Spade shares as well as regulatory approvals.
Kate Spade can terminate the transaction if the company is
offered a superior proposal from another suitor, and Coach can
terminate the deal if Kate Spade's board no longer supports it.
Either circumstance would require Kate Spade to pay Coach an $83.3
million termination fee.
Either company can call off the deal if it is not complete by
Feb. 7.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
May 08, 2017 08:07 ET (12:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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