The following is an excerpt from Johanna Bennett | May 8, 2017 | Barrons.com |
Wall Street seems to think that Coach (COH) has bagged a great deal with Kate Spade (KATE).
As one might expect, Kate Spade’s share price has surged almost 8.2% to $18.36 in recent market action on the news of its purchase by the rival handbag maker for $18.50 a share. But it’s the 5% jump in Coach’s share price, to $44.75, that illustrates Wall Street’s approval for the deal. It is common knowledge that if investors disapprove of a deal, they punish the acquirer’s stock price.
Eric Bender at Wunderlich Securities sees sense in the Coach acquisition and anticipates no rival bidders popping up to throw a wrench in things.
Given that we believe Coach makes the most sense as a strategic buyer and the recent weakness in Kate Spade results, we believe the $18.50 price is fair and we do not expect additional bidders to emerge. As such, we are reducing our price target and our rating on KATE.
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