Handbag maker Coach buys Kate Spade for $2.4 billion as it looks to tap the popularity of its smaller rival's quirky satchels and totes among millennials. Fred Katayama reports.
Handbag maker Coach is shelling out $2.4 billion to buy its smaller rival Kate Spade. With the purchase, Coach hopes to tap into a lucrative market - millennials - who love Kate Spade's quirky satchels and totes. Shares of both companies surged on the news. Laura Champine, managing director at Roe Equity Research, says at $24 billion, Coach got a bargain: (SOUNDBITE) LAURA CHAMPINE, SENIOR SELL-SIDE ANALYST & MANAGING DIRECTOR, ROE EQUITY RESEARCH (ENGLISH) SAYING: "Coach's skill set is actually very well-suited for Kate, meaning it gives them scale, they have many of the same landlords, the same type of supply chain, the same type of raw materials, even the geographies, where they're well-known, North America, Japan, China, are the same. So, this deal together, you put these companies together, their scale makes them a much stronger company." Kate Spade said in February it was exploring strategic options. Like many retailers, the company has suffered from fierce competition and a drop in traffic at stores. Coach has been looking for an acquisition for months to help turn around its business, especially in the bag category. The deal between the two is expected to close in the third quarter of 2017.