Coach is buying Kate Spade for $2.4 billion

Luxury retailer Coach announced on Monday it agreed to buy Kate Spade for $18.50 per share, for a total transaction value of $2.4 billion.

The combined company will create a "leading luxury lifestyle company" supported by "significant expertise in handbag design, merchandising, supply chain and retail operations," according to a statement.

The per-share acquisition price is 27.5% higher than Kate Spade's share price as of December 27, the last day of trading before deal rumors started affecting the stock price.

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Shares for the handbag and accessories maker surged 8.1% in pre-market trading on Monday, while Coach's stock was little changed.

"Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials," Coach CEO Victor Luis said in the release.

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Kate Spade has been under external pressure to do a deal since November, when New York-based hedge fund Caerus Investors sent the company's board a letter pushing for a sale.

"We have become increasingly frustrated by management's inability to achieve profit margins comparable to industry peers," Caerus' founder, Ward Davis, and managing partner, Brian Agnew, wrote at the time.

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