Caerus' letter helped boost shares of Kate Spade higher by around 8 percent to $17.93.
Financially too, because of similar nature of their businesses, the companies expect to realize cost synergies and operational efficiencies of close to $50 million over three years of closing the deal.
Given Coach's extensive worldwide presence, it would put the company in a good position to "unlock Kate Spade's largely untapped global growth potential", according to Victor Luis, CEO at Coach.
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. In January 2015, Coach spent $574 million to buy designer footwear maker Stuart Weitzman.
The deal is expected to close in early July 2017 - or Q3 - and the acquisition is expected to be accretive to earnings per share in fiscal 2018 on a non-GAAP basis. Coach is expected to keep the Kate Spade brand, but would be cutting back online flash sales and wholesale offerings. In the wake of speculation regarding the sale of Kate Spade, the company's stock had risen significantly.
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The deal is also part of Coach's ongoing turnaround strategy, which began in 2013 in the face of stiff competition, deceased foot traffic to department stores and heavy product discounting.
"Ultimately the aim for Coach is to become a business with a portfolio of distinct and compelling luxury brands". Since last fall, he's been saying Coach is on the lookout for "great brands", and media reports had mentioned British fashion house Burberry Group Plc and high-end shoemaker Jimmy Choo Plc, in addition to Kate Spade, as potential targets.
Accessories seller Coach said Monday that it had reached a deal to acquire upscale retailer Kate Spade in a shakeup for the luxury goods industry as it grapples with sluggish sales.
Kate Spade CEO Craig Leavitt told investors that the deal will allow the brand to "achieve long-term success" after working "hard to create a clear and distinct brand identity, differentiated storytelling and great products".
For watchers of Coach under CEO Victor Luis, who assumed the leadership position in January 2014, the play for Kate Spade isn't a shocker. Kate Spade & Company's financial advisor is Perella Weinberg Partners LP and its legal advisor is Paul, Weiss, Rifkind, Wharton & Garrison LLP.
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