Kate Spade Spikes 17% Amid M&A Speculation

Shares of Kate Spade & Co KATE, a designer and marketer of high-end accessories and apparel, soared more than 17 percent early Wednesday afternoon amid M&A speculation.

The Wall Street Journal reported that Kate Spade is exploring a sale of itself due to pressure from Caerus Investors, an activist investment firm.

The activist investor sent a letter to Kate Spade's board of directors on November 14 in which it urged the company to "take steps to realize shareholder value by pursuing a sale of the company."

Caerus Investors further noted that more than $3 billion in equity value has been wiped out over the past two and a half years following several quarters of disappointing sales and poor earnings results.

"Given the market's lack of faith in the current management team, as evidenced by the 63% decline in the shares since the intra-day high on August 11th, 2014, we believe the best path for enhancing shareholder value is to pursue a sale of the company," the firm added. "We strongly believe that a strategic, industry player would be willing to pay a substantial premium to add this growth business to their portfolio."

Who Can Buy Kate Spade?

WSJ suggested that Coach Inc COH remains an ideal company to acquire Kate Spade given its focus on handbags and accessories along with its presence in the department-store sector.

Coach's expertise in the international market could also leverage Kate Spade's growth outside of the US.

On the other hand, other luxury accessory makers, foreign buyers and buyout firms could also express interest in acquiring Kate Spate given its small size relative to its peers.