Accessories maker Coach (NYSE:COH) announced plans to acquire rival Kate Spade (NYSE:KATE), in a bid to target millenials and boost the squeezed middle of the leather goods market.
The New York-based handbag maker is set to take over Kate Spade in a deal worth $2.4 billion, with Coach offering $18.50 a share for the company.
Coach CEO Victor Luis said in a statement: “Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials.”
To Reuters, Luis said: “Our strongest belief is that middle class will in Europe, in U.S. and especially in developing markets provide us tremendous opportunity.”
Whilst Coach is a long-established American brand, Kate Spade was started in 1993 and has since seen exponential growth. It was quickly picked up by New York departments stores such as Sak’s and Neiman Marcus.
The deal has been approved by both companies, with both seeing shares rise on the announcement. Coach shares rose nearly five percent, with Kate Spade shares jumping by 8.2 percent.
Analysts confirmed the potential of the tie-up, with Robert W. Baird & Co analyst Mark Altschwager saying in an investor note:
“We like the complementary product assortments, complementary customer bases, potential for synergies.”