Coach Bags Kate Spade

New York design house of modern luxury accessories and lifestyle brands, Coach Inc has acquired its rival Kate Spade & Company for $2.4 billion, a figure “not justified strictly by the numbers” according to the New York Times.

The deal figure represents a 27.5 per cent premium on the share price of Kate Space before talk of a deal emerged in December. Coach’s chief executive Victor Luis has promised to only cut $50 million in costs and will apparently do so through making savings in the supply chain as opposed to closing stores. The New York Times states that taxed and capitalised, these are worth in the region of $320 million, which leads them to the conclusion Coach is overpaying by around $200 million.

The deal brings together two leading brands in the luxury goods sector and grants Coach access to millennial shoppers, which make up 60 per cent of Kate Spade’s customers.

Coach is no stranger to acquisitions having bought high-end shoe maker Stuart Weitzman in 2015 in a $574 million deal, gaining a further foothold in the luxury brand market. The Kate Space acquisition, Coach’s biggest yet, comes at a time when shoppers of luxury goods are increasingly challenging the traditional shopping methods in favour of online stores.

Speaking about the deal, Coach’s Luis said: “The acquisition of Kate Spade is an important step in Coach’s evolution as a customer-focused, multi-brand organisation. The combination enhances our position in the attractive global premium handbag and accessories, footwear and outerwear categories.”

Founded in 1993 by former journalist Kate Brosnahan Spade, Kate Spade has expanded quickly with its products stocked in high-end retailers such as Fifth Avenue and Saks. Its bags are particularly popular with millennials due to their colourful and quirky designs, with prices ranging from around $150 to $450.

The deal, which is expected to close in the third quarter of 2017, has been declared a good move for both businesses by analysts.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

Coach 2

%d bloggers like this: