Low value lifts Coach takeover odds
Shares of Coach have lost 17 per cent since faster-growing rival Michael Kors went public in 2011 and began an almost threefold rally. Even though Coach has the widest profit margins among peers, the US$14 billion company is trading for only 13.6 times earnings, lower than 96 per cent of similar-sized rivals.
Coach's handbags and shoes are being offered to buyers at one of the biggest bargains among luxury brands.
Shares of Coach have lost 17 per cent since faster-growing rival Michael Kors went public in 2011 and began an almost threefold rally. Even though Coach has the widest profit margins among peers, the US$14 billion company is trading for only 13.6 times earnings, lower than 96 per cent of similar-sized rivals.
Coach's valuation and cash generation could attract private-equity firms, Atlantic Equities said. Louis Vuitton and PPR may be among suitors drawn to its margins and the chance to expand Coach beyond the United States and Japan.
A buyer would have to bid at least 32 per cent more than Monday's close, Edward Jones said.
"If you're out there looking for a deal, it meets a lot of metrics," said Brian Yarbrough, an analyst at Edward Jones. "There is still growth available. They have a great brand. They generate a tonne of cash. They have a great balance sheet. What's not to like about it?"
Andrea Resnick, a spokeswoman for Coach, declined to comment on the company's takeover prospects.