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Report: Kate Spade Attracts Interest From Coach, Michael Kors

The two companies' boards are discussing the feasibility of going ahead with a bid, according to reports.
Kate Spade New York Autumn/Winter 2016 | Photo: Billy Farrell Agency
By
  • Bloomberg

NEW YORK, United States — Luxury handbag maker Kate Spade & Co. is attracting interest from high-end retailers including Coach Inc. and Michael Kors Holdings Ltd. as it pursues a sale, according to people familiar with the matter.

The two companies are speaking to their boards about the feasibility of going ahead with a bid, said the people, who asked not to be identified because the discussions are private. Kate Spade has also drawn interest from other luxury-brand companies outside of the US, one of the people said.

Deliberations are ongoing and no final decisions have been made, the people said.

New York-based Kate Spade planned to kick off a formal auction process this month and has drawn interest from six potential bidders, a person familiar with the matter said last month. Hedge fund Caerus Investors pushed the company in November to find an acquirer that could help it improve its profit margins.

Representatives for Coach, Michael Kors and Kate Spade declined to comment. Representatives for Caerus couldn’t immediately be reached for comment.

Caerus, which didn’t disclose the size of its stake, sent a letter to Chairman Nancy Karch in November saying its profit margins were lower than peers, destroying value for shareholders. Shares have declined almost 40 percent in the last three years, giving Kate Spade a market value of about $2.3 billion.

Talk of potential acquisitions has swept the luxury industry in the past year as designers look for ways to overcome sluggish mall sales, markdowns from excess inventory and fewer purchases from tourists. Coach and Michael Kors, two of Kate Spade’s biggest competitors, have said they are looking for acquisitions.

Kate Spade renamed itself from Fifth & Pacific after selling off its other major brands, Juicy Couture and Lucky. The company has sought to become a lifestyle brand, selling everything from clothes to home goods with a goal of quadrupling revenue to $4 billion annually.

By Ruth David and Stephanie Wong; editors: Elizabeth Fournier, Nick Turner, Aaron Kirchfeld and Amy Thomson.

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