Kate Spade is shopping for a potential buyer after an activist investor prodded the handbag maker, suggesting that another management team could squeeze more growth out of the brand, according to the Wall Street Journal.
On Wednesday, Kate Spade shares jumped 23 percent to $17.86 on reports that it was considering a sale.
Just six weeks ago, hedge fund Caerus Investors sent a letter to Kate Spade’s board urging it to consider a sale. The fund, which manages roughly $250 million and counts the accessories label as one of its top investments, has been invested in Kate Spade since 2009 when it was owned by Liz Claiborne.
Caerus argued that the company would be better off under the control of a global player that could help it expand in the US and abroad.
“The board deserved a wake-up call to come to its senses and realize there are other paths to realizing value,” Ward Davis of Caerus told The Post.
Since the letter was sent, Davis said that he and his colleague Brian Agnew have had a “constructive dialogue with key members of the board.”
“If Kate Spade is truly contemplating a process to explore alternatives or a sale, Caerus would support that,” Davis and Agnew told The Post, declining to confirm any knowledge of the reported deal talks.
Reps for Kate Spade did not immediately respond to requests to comment.
Kate Spade lowers 2016 forecast, stock drops 18%Michael Kors and Coach are among the most obvious potential buyers, industry experts say.
“Kate Spade is a strong brand that should be larger, and the notion of how to become larger is a fair question,” says Instinet retail analyst Simeon Siegel.
Kate Spade has long been a favorite among hedge fund investors. Jana Partners, Citadel, AQR, Balyasny and Point72 each have roughly 1 percent stakes in the company, according to data compiled by Bloomberg.
“The product resonates very strongly,” Siegel said, pointing to a Kate Spade collaboration with Everpurse last year on a bag that charges an iPhone. It sold out.
Kate Spade’s stock has been choppy, falling 30 percent since July compared with an 8 percent rise in the S&P 500, Wells Fargo analyst Ike Boruchow pointed out in a Wednesday research note.