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BREAKING: Coach Inks Agreement to Buy Kate Spade for $2.4B

NEW YORK — Timeless Trademark™ reported on Coach’s (NYSE: COH) preparation to purchase Kate Spade (NYSE: KATE) in late March.

Today, Timeless Trademark™ confirms that Coach announced on Monday it has a definitive agreement to acquire Kate Spade for $18.50 USD a share, reflecting a 27.5 percent premium to the closing price on 27 December 2016. The deal value is $2.4 billion USD. Both boards have approved the transaction.

CHICAGO, IL — 4 April 2016: Kate Spade store at 900 North Michigan, Chicago. Kate Spade New York is an American fashion design house.

Copyright: Sorbis
Editorial Credit: Sorbis/Shutterstock.com

Last week, shares of Kate Spade ended at $16.97 USD as word began spreading that Kate Spade’s chief executive was seen at Coach’s offices.

Coach says the combination will create a leading luxury lifestyle company. And to all Kate Spade lovers: Coach is “focused on preserving Kate Spade’s brand independence, as well as retaining key talent.”

The deal will be funded by senior notes, bank term loans, and excess cash. Coach has secured committed bridge financing from Bank of America Merrill Lynch. It is expected to close in the third quarter of 2017.

Shares of Kate Spade rose 8.5 percent to $18.41 USD in pre-market trading. Coach shares rose 1.2 percent to $43.37 USD.

Victor Luis, chief executive officer of Coach, said, “Kate Spade has a unique brand positioning and strong awareness among consumers, especially millenials.” Luis added that Coach’s experience in opening and operating specialty retail stores globally can help unlock Kate Spade’s largely untapped global growth potential.

Coach’s chief financial officer, Kevin Wills, believes it can realise a run rate of $50 million USD in synergies within three years of closing the deal. These will be realised through improved scale and inventory management, operational efficiencies, and the optimisation of Kate Spade’s supply chain network.

Wills added that Coach will reduce sales in Kate Spade’s wholesale business and online flash sales.

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