Michael Kors Buys Greater China Licensee For $500 Million

Michael Kors Holdings Ltd KORS revealed that it completed Michael Kors (HK) Limited acquisition, the exclusive licensee of the Company in China and some other jurisdictions in Asia, on May 31 for $500 million in cash, subject to some adjustments. According to the company, the acquisition was approved by the independent members of its board of directors on recommendation of a Special Committee, which was responsible for evaluating the acquisition terms.

Michael Kors said the Special Committee retained independent legal and financial advisors to assist in evaluating and negotiating the terms of the acquisition, as well as, the Purchase Agreement. For the year March 2016, the Greater China business generated total revenue of $197 million, and had a network of 91 company-operated retail stores and six travel retail locations, in China, Hong Kong, Macau and Taiwan.

The company indicated the Greater China business is predicted to add about $200 million to retail net sales in the fiscal year 2017, reflecting sales for the 10-month period following the closing of the acquisition. The company expects the acquisition to be neutral to its earnings per share on a GAAP basis, and accretive to earnings per share on a non-GAAP basis, excluding $15 million of one-time acquisition costs. The acquisition is predicted to be accretive to earnings per share in fiscal 2018 and thereafter.

Michael Kors Chairman and CEO, John Idol, commented, "We are very excited about the acquisition of our Greater China licensee. As you know, we have worked diligently over the past several years, with our licensed partner in this region, to build the infrastructure, establish the brand, and grow acceptance of Michael Kors in the Chinese market. We believe that our brand is gaining strong momentum in Greater China, making it the ideal time for us to integrate this territory into our business and capitalize on the enormous growth potential in this region."

In the pre-market on Wednesday, the stock traded 5.05 percent higher following an earnings beat.