High-end apparel and handbag maker Kate Spade & Co said it is exploring the possible sale of the business according to people who are familiar with the situation, after it came under heavy pressure from one of its activist shareholders.
The company, based in New York, is working together with an investment bank searching for potential buyers, including retailers, said one of those aware of the situation. The process was described as being in the early stage.
As of midweek, Kate Spade’s market value was $1.9 billion. It has seen its value drop amidst a tough retail environment.
During November, Caerus Investors, an activist hedge fund disclosed it owned a small stake of Kate Spade and called for the business to consider finding a buyer.
It said that there had been a steep decline in the shares of the company since the middle of 2014 and the market lost its faith in the company’s management.
The activist shareholder said it believed the best path for enhancing the value for shareholders it pursuing a sale of the business.
A representative for Kate Spade declined to make a comment late Wednesday.
Shares of Kate Spade traded in 2014 for as high as $40 but on Wednesday were down to just $14.51.
There could be a number of possible suitors for Kate Spade. Coach Inc has been considered for a long time as a good home for the company, given the focus Coach has on handbags as well as accessories and its presence in department stores.
Coach would also be helpful to Kate Spade relative to expansion abroad. However, Kate Spade might also attract makers of luxury accessories, buyout companies and foreign buyers, in part due to its size being manageable.
Kate Spade at one time was part of the Fifth & Pacific Cos. that had been known formerly as Liz Claiborne. The remaining brand of the retail conglomerate faltered, but Kate became the company’s star.
Liz Claiborne sold the other brands in the company, such as its namesake and Juicy Couture, until it had just Kate Spade left. The company was then named Kate Spade & Co.
As well as its own retail outlets, the brands of the company, which includes Jack Spade a men’s label, are sold through department stores like Nordstrom and Saks Fifth Avenue.
The company also has its own outlet stores, which sell some of the collection at price points that are lower.
For its third quarter that ended October 1, Kate Spade posted an increase in sales of more than 14% to end the quarter at $317 million.