Analyst: A Coach-Burberry Combination Would Be A 'Merger Of Problems'

Shares of Coach Inc COH were trading higher by nearly 4 percent early Friday morning following unconfirmed reports the fashion icon is being targeted for an acquisition by London-based Burberry Group (which trades BBRYF in addition to on the LON under ticker BRBY).

A Betaville report suggested that Coach is working with financial advisers on a combination with Burberry.

However, investors shouldn't rush to assume a deal will happen, at least not yet. Exane BNP Paribas' analyst Luca Solca was quoted by Bloomberg as saying in a research note that a merger between Coach and Burberry "would primarily be a merger of problems" and "M&A history in luxury has shown that mergers don't obviously help in regaining brand traction and desirability."

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Both companies are struggling to spur growth at a time when luxury spending is decreasing. Bloomberg pointed out that both companies recently reshuffled their management roster in hopes of bringing in fresh blood that can reverse declining trends.

It is also important to note that reports surfaced earlier this year that Burberry itself tapped advisers to prepare a defense against a possible bid for the company after an un-named investor acquired a 5 percent stake in the U.K.-fashion icon.

Burberry's London-listed stock BRBY gained nearly 6 percent following the report.

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