What's The Takeout Rate For Kate Spade?

Since reports of Kate Spade & Co (NYSE: KATE) exploring sale emerged, the market is abuzz with speculations over the price at which the handbag maker shouldsell itself.

SunTrust expects a takeout price in the range of $18-$23 per share after analyzing recent similar deals. The brokerage believes a deal is likely amid pressure from hedge fund Caerus Investors.

“Although results/ guidance have largely disappointed over the past year and external headwinds limit NT upside, we believe that its strong brand should make it an attractive acquisition target. As such, we believe a deal is likely,” analyst Pamela Quintiliano wrote in a note.

A report from Bloomberg said the company is planning to begin a formal sale process next month. The source says there are six potential bidders.

“We think the bidder would likely be a strategic buyer with leading market share in the accessories space,” Quintiliano continued.

The analyst, who maintained her Hold rating on the stock, says the company like its peers was a victim of slower traffic at its stores, weaker spending in Asian regions, and the highly competitive/promotional environment.

That said, Kate Spade has deployed several initiatives including micro-assorting, speed-to-market, more emphasize on digital marketing and growing the number of cross category shoppers.

The analyst believes these steps have the potential to unlock hidden value longer-term as external headwinds will eventually subside.

Quintiliano raised her price target to $18 from $15 on the shares, which, at last check, traded around $18.74.