New York-based accessories company Coach, Inc. has announced it has signed a definitive agreement to acquire Kate Spade & Company. Under the terms of the transaction Kate Spade shareholders will receive $18.50 per share in cash for a total transaction value of $2.4 billion. The transaction represents a 27.5 percent premium to the unaffected closing price of Kate Spade’s shares as of December 27, the last trading day prior to media speculation of a transaction. The transaction has been unanimously approved by the Boards of Directors of Kate Spade & Company and Coach, Inc.
The $2.4 billion purchase price is expected to be funded by a combination of senior notes, bank term loans and approximately $1.2 billion of excess Coach cash, a portion of which will be used to repay an expected $800 million six-month term loan. The transaction is expected to close in the third quarter of calendar 2017, subject to customary closing conditions, including the tender of a majority of the outstanding Kate Spade & Company shares pursuant to the offer and receipt of required regulatory approvals.
“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,” said Victor Luis, chief executive officer of Coach. “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.”
Craig A. Leavitt, chief executive officer of Kate Spade & Company, commented, “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. 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.”
“The acquisition of Kate Spade is an important step in Coach’s evolution as a customer-focused, multi-brand organization,” added Luis. “The combination enhances our position in the attractive global premium handbag and accessories, footwear and outerwear categories, bringing product, brand positioning and customer diversification to the portfolio, and establishing scale in key functions with the resources to invest in talent and innovation. In addition, we believe the Kate Spade brand will benefit from our best-in-class supply chain and strong corporate infrastructure.”
Kate Spade & Company operates principally under two global, multichannel lifestyle brands: Kate Spade New York and Jack Spade New York. The company’s four category pillars – women’s, men’s, children’s and home – span demographics, genders and geographies. The company also owns Adelington Design Group, a private brand jewelry design and development group.