The luxury retailer Coach announced on Monday that it agreed to buy Kate Spade for $18.50 a share, for a total transaction value of $2.4 billion.
A statement released by Coach said the combined company will create a "leading luxury lifestyle company" supported by "significant expertise in handbag design, merchandising, supply chain, and retail operations."
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.
Still, it's 23% below a nine-month high of $24.10 reached February 27.
Shares for the handbag and accessories maker surged by 8.1% in premarket trading 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.
Kate Spade has been under external pressure to do a deal since November, when the 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.
