Coach has agreed to buy Kate Spade New York for $2.4bn (£1.9bn) to create “the first New York-based house of modern luxury lifestyle brands”, said Coach chief executive Victor Luis.
The transaction is expected to close in the third quarter of the 2017 financial year.
Luis said the new group will be “defined by authentic, distinctive products and fashion innovation”. The company also hopes to expand Kate Spade globally, based on its experience in building the Coach brand in international markets.
Luxury accessories brand Coach expects to realise $50m (£38.6m) in cost savings within three years of the deal closing, through operational efficiencies, improved scale and inventory management, and the optimisation of Kate Spade’s supply chain network.
The business said it will reduce sales in Kate Spade’s wholesale disposition and online flash sales channels to ensure the long-term viability and health of the brand, similar to the steps Coach has taken over the last three years.
Luis added: “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.”