With eye on millennials, Coach buys Kate Spade

Mon May 8, 2017 5:19pm EDT
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By Sruthi Ramakrishnan

(Reuters) - Handbag maker Coach Inc (COH.N: Quote) said it would buy Kate Spade & Co (KATE.N: Quote) for $2.4 billion as it looks to tap the popularity of its smaller rival's quirky satchels and totes among millennials.

The $18.50 per share offer in cash represents a premium of 9 percent to Kate Spade's Friday close. Kate Spade's stock was trading at $18.36 on Monday, while Coach's shares were up 5 percent at $44.80.

Kate Spade's shares have risen 17 percent since Dec. 27, a day before reports emerged that the company was looking to sell itself.

Kate Spade's handbags have struck a chord with millennials due to their subtle logos and quirky and colorful designs, including bags shaped like cats and cars.

But the company, like other luxury handbag makers including Coach, has struggled to live up to market expectations amid fierce competition and a drop in traffic to department stores.

Coach Chief Executive Victor Luis downplayed the slowdown in the handbag market.

"Our strongest belief is that middle class will in Europe, in (the) U.S. and especially in developing markets provide us tremendous opportunity," Luis told Reuters.

He is banking on Kate Spade's appeal with millennials.   Continued...

FILE PHOTO: A model presents a creation from the Kate Spade Spring/Summer 2014 collection during New York Fashion Week September 6, 2013. REUTERS/Eric Thayer/File Photo