Coach Will Buy Kate Spade For $2.4 Billion

Shares of Kate Spade & Co KATE gained more than 8 percent Monday morning after the accessories and apparel maker agreed to sell itself to rival Coach Inc COH for $18.50 per share.

Investors shouldn't necessary be surprised by Monday's announcement. Activist investor and major Kate Spade shareholder Caerus Investors sent a letter to the company's board in November of 2016 imploring the company to sell itself.

Caerus' letter helped boost shares of Kate Spade higher by around 8 percent to $17.93. The stock went on to trade at a 52-week high of $24.24 but slowly retreated below the $20 per share mark as the prospects of the deal faded.

Nevertheless, many analysts remained convinced a Kate Spade takeover was imminent.

Details Of The Deal

As part of the takeover agreement, Kate Spade shareholders will receive $18.50 per share, which values the entire transaction at $2.4 billion. The deal has been approved by the Boards of Directors of both companies.

Coach expects the deal to realize a run rate of around $50 million in synergies within three years of the deal closing. The synergies will come from operational improvements, along with increased scale, improvement inventory management, and the optimization of Kate Spade's supply chain network.

Coach also expects the deal to be accretive to its fiscal 2018 results on a non-GAAP basis and reach double-digit accretion by the following year.

See Also:

Deckers Outdoor Potential M&A: From Rumor To Reality

Wall Street's M&A Chatter From May 5-7: Sinclair-Tribune, Avantor-VWR, Belden-Digi