Coach to Acquire Stuart Weitzman

Coach to Acquire Stuart Weitzman

Coach, Inc. has signed a definitive agreement with private equity firm Sycamore Partners to acquire Stuart Weitzman Holdings LLC, a leading designer and manufacturer of women’s luxury footwear. The transaction will complement Coach’s current leadership position in premium handbags and accessories, while immediately adding to the company’s earnings as it continues to make meaningful progress against its brand transformation announced earlier this year.

Victor Luis, Chief Executive Officer, Coach, Inc., said, “Stuart Weitzman is a leading American luxury designer footwear brand with a solid growth trajectory and further significant domestic and international development potential. 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.”

Stuart Weitzman, Creative Director and Executive Chairman of Stuart Weitzman Holdings LLC, said, “What an exciting beginning to the new year. People Magazine has named our “Highland” the Trendsetter Boot of 2014, Life & Style Weekly has recognized our “Nudist” as the ‘It Shoe’ and the Celebrity Red Carpet Shoe of 2014. And Coach has selected us as its first acquisition. In Coach, we have found a strategic partner that respects our culture, and offers the scale, resources, and global business acumen to enable us to realize our full potential. 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. We also look forward to supporting the Coach team with our technical and merchandising expertise in footwear.”

Stuart Weitzman markets its products in fine specialty and department stores worldwide and in its own retail stores in the U.S. and Europe. Stuart Weitzman realized net revenues of approximately $300 million for the twelve months ended September 30, 2014.

Over the last five years, Stuart Weitzman has experienced robust growth with sales growing at a 10% compounded annual rate driven by distribution, e-commerce and same store sales gains. Over the same period, the company has gained increasing global recognition by being the choice of key celebrities; with its iconic campaigns featuring Gisele, Kate Moss and Natalia Vodianova, all photographed by Mario Testino. The company has developed a global multi-channel distribution network including directly operated stores in the U.S. and Europe, international licensed stores and shop-in-shops, and a significant global wholesale business, with the brand currently available in 70 countries. Stuart Weitzman will continue as Creative Director and Executive Chairman of Stuart Weitzman Holdings LLC, and together with Wayne Kulkin, Chief Executive Officer of Stuart Weitzman, and their management team, remains fully committed to the growth of the business.

Under the terms of the agreement, Coach will make initial cash payments of approximately $530 million to Sycamore Partners. In addition, Coach will make up to $44 million in contingent payments to Sycamore Partners upon the successful achievement of selected revenue targets over the three years following the closing of the acquisition.

Coach will finance the transaction with cash on hand or other sources of financing available to the company in the credit and capital markets. The acquisition is expected to be accretive to earnings per share, exclusive of transaction-related charges including anticipated purchase accounting adjustments and contingent payments related to the transaction, and is anticipated to close by May 2015, subject to customary closing conditions, including expiration of the Hart-Scott-Rodino Antitrust waiting period.

The financial adviser to Coach was Perella Weinberg Partners. Goldman, Sachs & Co. and Citigroup Global Markets, Inc. acted as financial advisers to Sycamore Partners.