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
NEW YORK--(BUSINESS WIRE)--May 8, 2017--
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.
This Smart News Release features multimedia. View the full release here:
http://www.businesswire.com/news/home/20170508005427/en/
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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170508005427/en/
Source: Coach, Inc.
Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
Global
Head of Investor Relations and Corporate Communications
AResnick@coach.com
or
Christina
Colone, 212-946-7252
Senior Director, Investor Relations
CColone@coach.com
or
Kate
Spade & Company
Investor Relations:
Priya Trivedi,
201-295-6110
Vice President, Finance & Treasurer
PTrivedi@katespade.com
or
Media:
Emily
Garbaccio, 212-739-6552
Vice President, Communications
EGarbaccio@katespade.com
or
Additional
Contacts:
Media
Abernathy MacGregor
Tom Johnson / Pat
Tucker, 212-371-5999
tbj@abmac.com
/ pct@abmac.com