Luxury handbag and accessories company Coach (COH) is expanding its footwear collection, buying Stuart Weitzman Holdings LLC from private equity firm Sycamore Partners for about $530 million.
Coach Inc. will also make up to $44 million in contingent payments to Sycamore Partners if certain revenue targets are hit over the three years after the deal closes.
"Stuart Weitzman is a leading American luxury designer footwear brand with a solid growth trajectory and further significant domestic and international development potential," Coach, Inc. CEO Victor Luis said in a statement, "Importantly, the size, scope and vibrancy of the Stuart Weitzman brand, along with the continuity of its management team, allows for a seamless transition to Coach ownership, as we continue to focus on Coach’s brand transformation. Over the medium term, we look forward to advancing the Stuart Weitzman brand’s global development, especially by leveraging Coach’s international infrastructure and expertise in handbags and accessories. In addition, we look forward to benefiting from the Stuart Weitzman team’s expertise in footwear development where they’re proven leaders in fashion and fit. Our strong balance sheet provides the flexibility to take advantage of this opportunity while re-investing in our core business and continuing to maintain our dividend at current levels."
Coach is in the midst of transforming its brand, working to reduce the level of its promotions and changing product offerings. The company previously announced that it plans to close about 70 underperforming stores in fiscal 2015 as it tries to make its business more competitive with fast-growing rivals.
Stuart Weitzman had approximately $300 million in revenue for the 12 months ended Sept. 30, 2014. The brand is currently available in 70 countries. Its products are sold in fine specialty and department stores globally and in its own retail stores in the U.S. and Europe.
"We are excited to be working with the Coach team and leveraging its strong infrastructure to help us drive efficiency and expand our product mix to an even broader consumer base worldwide," Stuart Weitzman, creative director and executive chairman of Stuart Weitzman Holdings, said in a statement on Tuesday.
Weitzman will remain in his roles with the company.
New York-based Coach said it will finance the deal with available cash and other sources of financing available to it in the credit and capital markets. The acquisition is expected to add to its earnings per share, excluding transaction-related costs.
The deal is expected to close by May.
Coach's stock rose 46 cents, or 1.3 percent, to $37.19 in premarket trading shortly before the market open. Its shares were down 34 percent over the past year through Monday's close.