Combination Creates First New York-Based
House of Modern Luxury Lifestyle Brands
Acquisition Expected to be Accretive in
Fiscal 2018 and to Reach Double-Digit Accretion by Fiscal 2019 on a
non-GAAP Basis
Coach, Inc. (NYSE:COH) (SEHK:6388), a leading New York design
house of modern luxury accessories and lifestyle brands, today
announced it has signed a definitive agreement to acquire Kate
Spade & Company (NYSE:KATE). Under the terms of the transaction
Kate Spade shareholders will receive $18.50 per share in cash for a
total transaction value of $2.4 billion. The transaction represents
a 27.5% percent premium to the unaffected closing price of Kate
Spade’s shares as of December 27, 2016, the last trading day prior
to media speculation of a transaction. The transaction has been
unanimously approved by the Boards of Directors of Kate Spade &
Company and Coach, Inc.
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Victor Luis, Chief Executive Officer of Coach, Inc. said, “Kate
Spade has a truly unique and differentiated brand positioning with
a broad lifestyle assortment and strong awareness among consumers,
especially millennials. Through this acquisition, we will create
the first New York-based house of modern luxury lifestyle brands,
defined by authentic, distinctive products and fashion innovation.
In addition, we believe Coach’s extensive experience in opening and
operating specialty retail stores globally, and brand building in
international markets, can unlock Kate Spade’s largely untapped
global growth potential. We are confident that this combination
will strengthen our overall platform and provide an additional
vehicle for driving long-term, sustainable growth.”
Craig A. Leavitt, Chief Executive Officer of Kate Spade &
Company, said, “Following a thorough review of strategic
alternatives, reaching an agreement to join Coach’s portfolio of
global brands will maximize value for our shareholders and
positions Kate Spade for long-term success as we continue our
evolution into a powerful, global, multi-channel lifestyle brand.
We look forward to working with Coach’s leadership team to leverage
their expertise across the business as we continue to innovate and
build long-term loyalty with consumers and expand across our
product category and geographic axes of growth.”
Kevin Wills, Coach’s Chief Financial Officer added, “Due to the
complementary nature of our respective businesses, we believe that
we can realize a run rate of approximately $50 million in synergies
within three years of the deal closing. These cost synergies will
be realized through operational efficiencies, improved scale and
inventory management, and the optimization of Kate Spade’s supply
chain network. At the same time, to ensure the long-term viability
and health of the Kate Spade brand, and similar to the steps Coach
has itself taken over the last three years, we plan to reduce sales
in Kate Spade’s wholesale disposition and online flash sales
channels. Therefore, the reduction in profitability from the
pullback in these channels will be offset by the realization of
these substantial synergies. As a result, we expect that the
acquisition will be accretive in fiscal 2018 on a non-GAAP basis,
and will reach double-digit accretion by fiscal 2019, also on a
non-GAAP basis.”
Mr. Luis concluded, “The acquisition of Kate Spade is an
important step in Coach’s evolution as a customer-focused,
multi-brand organization. The combination enhances our position in
the attractive global premium handbag and accessories, footwear and
outerwear categories, bringing product, brand positioning and
customer diversification to the portfolio, and establishing scale
in key functions with the resources to invest in talent and
innovation. In addition, we believe the Kate Spade brand will
benefit from our best-in-class supply chain and strong corporate
infrastructure.”
Strategic Rationale
The combination of Coach, Inc. and Kate Spade & Company will
create a leading luxury lifestyle company with a more diverse
multi-brand portfolio supported by significant expertise in handbag
design, merchandising, supply chain and retail operations as well
as solid financial acumen. Coach’s history and heritage,
multi-channel, international distribution model, and seasoned
leadership team uniquely position it to drive long-term sustainable
growth for Kate Spade. Coach is focused on preserving Kate Spade’s
brand independence as well as retaining key talent, ensuring a
smooth transition to Coach, Inc.’s ownership.
Transaction Details
The transaction is not subject to a financing condition. Coach
has secured committed bridge financing from BofA Merrill Lynch. The
$2.4 billion purchase price is expected to be funded by a
combination of senior notes, bank term loans and approximately $1.2
billion of excess Coach cash, a portion of which will be used to
repay an expected $800 million 6-month term loan. The transaction
is expected to close in the third quarter of calendar 2017, subject
to customary closing conditions, including the tender of a majority
of the outstanding Kate Spade & Company shares pursuant to the
offer and receipt of required regulatory approvals.
Advisors
Coach’s financial advisor is Evercore Group L.L.C. and its legal
advisor is Fried, Frank, Harris, Shriver & Jacobson LLP. Kate
Spade & Company’s financial advisor is Perella Weinberg
Partners LP and its legal advisor is Paul, Weiss, Rifkind, Wharton
& Garrison LLP.
Conference Call
Coach, Inc. and Kate Spade & Company will hold a conference
call and webcast at 8:30 a.m. EDT today, May 8, 2017, to discuss
the transaction. Interested parties may listen to the webcast by
accessing www.coach.com/investors or www.katespadeandcompany.com on
the Internet, or dialing into 1-888-802-8577 or 1-973-935-8754
and providing the Conference ID 20303086. An investor presentation
will also be available for download at www.coach.com/investors.
A telephone replay will be available starting at 12:00 p.m. EDT
today, for a period of five business days. To access the telephone
replay, call 1-800-585-8367 or 1-404-537-3406 and enter the
Conference ID 20303086. A webcast replay of the conference call
will also be available for five business days.
About Coach
Coach, Inc. is a leading New York design house of modern luxury
accessories and lifestyle brands. The Coach brand was established
in New York City in 1941, and has a rich heritage of pairing
exceptional leathers and materials with innovative design. Coach is
sold worldwide through Coach stores, select department stores and
specialty stores, and through Coach’s website at www.coach.com. In
2015, Coach acquired Stuart Weitzman, a global leader in designer
footwear, sold in more than 70 countries and through its website at
www.stuartweitzman.com. Coach, Inc.’s common stock is traded on the
New York Stock Exchange under the symbol COH and Coach’s Hong Kong
Depositary Receipts are traded on The Stock Exchange of Hong Kong
Limited under the symbol 6388.
About Kate Spade & Company
Kate Spade & Company (NYSE:KATE) operates principally under
two global, multichannel lifestyle brands: kate spade new york and
Jack Spade New York™. The Company’s four category pillars –
women’s, men’s, children’s and home – span demographics, genders
and geographies. Known for crisp color, graphic prints and playful
sophistication, kate spade new york aims to inspire a
more interesting life. The kate spade new york collection
includes the Madison Avenue, Broome Street and on
purpose labels. Jack Spade New York offers a timeless and
versatile assortment of bags, sportswear and tailored clothing
founded on the aesthetic of simple, purposeful design. The Company
also owns Adelington Design Group, a private brand jewelry design
and development group.
Visit www.katespadeandcompany.com for more
information.
Neither the Hong Kong Depositary Receipts nor the Hong
Kong Depositary Shares evidenced thereby have been or will be
registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered or sold in the
United States or to, or for the account of, a U.S. Person
(within the meaning of Regulation S under the Securities Act),
absent registration or an applicable exemption from the
registration requirements. Hedging transactions involving these
securities may not be conducted unless in compliance with the
Securities Act.
Additional Information and Where You Can Find It
The tender offer referred to in this press release has not yet
commenced. This press release is for informational purposes only
and is neither an offer to purchase nor a solicitation of an offer
to sell, securities, nor is it a substitute for the tender offer
materials that will be filed with the U.S. Securities and Exchange
Commission (“SEC”). The solicitation and offer to buy the issued
and outstanding shares of Kate Spade & Company common stock
will only be made pursuant to an offer to purchase and related
tender offer materials described more fully below. At the time the
tender offer is commenced, a subsidiary of Coach, Inc. will file a
tender offer statement with the SEC on Schedule TO containing an
offer to purchase, form of letter of transmittal and related
materials, and Kate Spade & Company will file with the SEC a
tender offer solicitation/recommendation statement on Schedule
14D-9 with respect to the tender offer. INVESTORS AND STOCKHOLDERS
ARE URGED TO READ THE TENDER OFFER STATEMENT AND RELATED MATERIALS
(INCLUDING THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND
OTHER TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION
STATEMENT CAREFULLY (WHEN THEY BECOME AVAILABLE) AND IN THEIR
ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TENDER OFFER THAT SHOULD BE READ PRIOR TO MAKING A DECISION TO
TENDER SHARES. These materials will be sent free of charge to all
Kate Spade & Company stockholders. In addition, all of those
materials (and all other tender offer documents filed or furnished
by Kate Spade & Company or Coach, Inc. or any of its
subsidiaries with the SEC) will be available at no charge from the
SEC through its website at www.sec.gov. The Schedule TO (including
the offer to purchase and related materials) and the Schedule 14D-9
(including the solicitation/recommendation statement), once filed,
may also be obtained for free by contacting the Information Agent
for the tender offer which will be named in the Schedule TO.
In addition to the offer to purchase, the related letter of
transmittal and certain other tender offer documents, as well as
the Solicitation/Recommendation Statement, Coach, Inc. and Kate
Spade & Company file annual, quarterly and current reports and
other information with the SEC. You may read and copy any reports
or other information filed by Coach, Inc. or Kate Spade &
Company at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Coach, Inc.’s and
Kate Spade & Company’s filings with the SEC are also available
to the public from commercial document-retrieval services and at
the SEC’s website at www.sec.gov.
Cautionary Statement Regarding Forward-Looking
Statements
This report may contain “forward-looking statements” within the
meaning of the federal securities laws, including Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In this context,
forward-looking statements often address expected future business
and financial performance and financial condition, and often
contain words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “see,” “will,” “would,” “target,” similar
expressions, and variations or negatives of these words.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about the
consummation of the proposed transaction and the anticipated
benefits thereof. Such statements involve risks, uncertainties and
assumptions. If such risks or uncertainties materialize or such
assumptions prove incorrect, the results of Coach, Inc. and its
consolidated subsidiaries could differ materially from those
expressed or implied by such forward-looking statements and
assumptions. All statements other than statements of historical
fact are statements that could be deemed forward-looking
statements, including any statements regarding the expected
benefits and costs of the tender offer, the merger and the other
transactions contemplated by the merger agreement by and between
Kate Spade & Company and Coach, Inc.; the expected timing of
the completion of the tender offer and the merger; the ability of
Coach, Inc. (and its subsidiary) and Kate Spade & Company to
complete the tender offer and the merger considering the various
conditions to the tender offer and the merger, some of which are
outside the parties’ control, including those conditions related to
regulatory approvals; any statements of expectation or belief; and
any statements of assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the possibility that
expected benefits may not materialize as expected; that the tender
offer and the merger may not be timely completed, if at all; that,
prior to the completion of the transaction, Kate Spade &
Company’s business may not perform as expected due to
transaction-related uncertainty or other factors; that the parties
are unable to successfully implement integration strategies; and
other risks that are described in Coach, Inc.’s latest Annual
Report on Form 10-K and its other filings with the SEC. Coach,
Inc. and Kate Spade & Company assume no obligation and do not
intend to update these forward-looking statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20170508005427/en/
CoachAnalysts & Media:Andrea Shaw Resnick,
212-629-2618Global Head of Investor Relations and Corporate
CommunicationsAResnick@coach.comorChristina Colone,
212-946-7252Senior Director, Investor
RelationsCColone@coach.comorKate Spade & CompanyInvestor
Relations:Priya Trivedi, 201-295-6110Vice President, Finance &
TreasurerPTrivedi@katespade.comorMedia:Emily Garbaccio,
212-739-6552Vice President,
CommunicationsEGarbaccio@katespade.comorAdditional
Contacts:MediaAbernathy MacGregorTom Johnson / Pat Tucker,
212-371-5999tbj@abmac.com / pct@abmac.com
Kate Spade & Company (NYSE:KATE)
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