Kate Spade & Company acquired by Coach

Coach agreed on 8 May 2017 to acquire the whole of Kate Spade & Company at 18.50 dollars per share in cash, an enterprise value of $1–10bn and a premium of 27.5% to the closing price of 27 December 2016, the last trading day before press speculation. Kate Spade & Company designs and sells handbags, small leather goods, clothing, footwear and homeware under the kate spade new york and Jack Spade names, identified by bright colour and graphic print. It distributes through its own stores, department store concessions, wholesale accounts and online channels, and owns Adelington Design Group, which develops jewellery for retailers’ own brands. The plan provided for reducing the acquired company’s sales. The acquirer intended to withdraw from wholesale clearance and online flash sales, channels that generate volume at low margin and expose a brand to permanent discounting, having conducted the same retreat across its own business over the preceding three years. Approximately 50 million dollars of annual cost synergies were expected within three years, from purchasing, inventory management and the reorganisation of the acquired company’s supply chain, sufficient to offset the profit foregone through that withdrawal, with the transaction expected to add to non-GAAP earnings in the 2018 financial year and by double digits in 2019. Younger customers constituted the principal attraction, the acquired brand holding recognition among that group which the acquirer’s own name, established in 1941, did not command to the same degree, and its international presence remained limited relative to its domestic position. Chief executive Craig Leavitt had conducted a review of strategic alternatives before the agreement, and the acquirer undertook to operate the brand separately within its portfolio. Evercore advised Coach, with Fried, Frank, Harris, Shriver & Jacobson as legal counsel, while Perella Weinberg advised Kate Spade & Company, with Paul, Weiss as counsel.