Michael Kors zip clutch
Uncategorized / August 22, 2017

Michael Kors ┬áhas been losing steam recently as the company is projected to report the first revenue decline in years. As a result of revenue decline, its share price tumbled by more than 60% from its peak. So naturally, the management has explored various options to restore the growth including the option of an acquisition as it was highlighted by management on the last earnings call dated 7th February.According to Bloomberg, the company has been in early talks with Kate Spade (NYSE:KATE) as the potential takeover target. While there are still more companies interested in the acquisition, I have taken a perspective of Michael Kors’ shareholders and the potential benefits that would arise from such an acquisition. The most obvious reason is the revenue growth that Kate Spade has been able to achieve and Michael Kors has been losing, but I am going to argue that there are more benefits beyond the revenue growth. The newly created company should have a higher valuation than is the value of two separate entities. This would particularly happen from the preservation of gross margin, lower SG&A expenses, and a more optimal capital structure. So let’s take each of the potential benefits separately.One of…