Kate Spade Coach

Coach wanted to grow further, in doing so; it purchased Kate Spade & Co, the company known for its luxury handbags and accessories.

The terms of the deal were announced on Monday; Kate spade shareholders will receive $18.5 per share in cash.

The transaction represents a 27.5% premium to Kate Spades share from where the stock was trading before talks of a sale in December, and a 9 percent premium to its last closing price on Friday.

Kate Spade was looking into strategic options, after demands from Caerus Investors to the company to be sold because of the company’s inability to achieve profit margins comparable to competitors in the industry.

The company suffered in keeping up with market’s expectations amid strong competition and slow market traffic.

Coach CEO Victor Luis said he planned to “unlock Kate Spade’s largely untapped global growth potential” and that the acquisition provides “an additional vehicle for driving long-term, sustainable growth.

The NewYork based company stated that it will preserve Kate Spade’s brand independence.

Coach expects to have a run rate of about $50 million in savings by combining the firms’ inventory management and supply chains within three years of the closing of the deal.

The multinational luxury fashion said it will stop Kate Spade’s discounts in retail or online, which is good for the business but bad for bargain hunting lovers.

Coach also said that the $2.4 billion buy will be funded half in cash and half in debt.

Coach had successfully purchased Stuart Weitzman before its decision to buy Kate Spade, Stuart Weitzman is a designer shoe company and Coach paid $574 million for it in 2015. That sale helped picking up overall sales when Coach-branded products were struggling.

The Kate Spade deal was unanimously approved by the board of both companies and is expected to close before 2018.

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