Coach bags New York rival Kate Spade for $2.4bn

The maker of the quintessential New York handbag is taking over its younger rival in a deal worth $2.4bn (£1.85bn)

Coach is offering $18.50 a share for Kate Spade in a bid to create a multi-brand fashion house.

Both firms are grappling with sliding sales at US department stores where their products have traditionally been sold.

Shares in Coach rose 4.6% in New York, while Kate Spade jumped 8.2%.

Coach was founded in 1941, while Kate Spade was established in 1993 by former journalist Kate Brosnahan Spade.

It expanded quickly and its products stocked by upmarket retailers such as Saks Fifth Avenue and Neiman Marcus.

Although Coach and Kate Spade sell shoes and clothing - the latter is a favourite of the Duchess of Cambridge - both are best-known for their handbags.

Kate Spade's handbags have found favour with millennials due to their subtle logos and quirky and colourful designs, including bags shaped like cats and cars.

Victor Luis, chief executive of Coach, said the acquisition would allow his firm to target "a new customer segment".

Prices for a Kate Spade tote bag starts at about $150 and rise to around $450. A Coach equivalent begins at about $285 but can rise to as much as $2,500.

Mr Luis, who took over as chief executive in 2014, has been working to expand Coach's lines and two years ago acquired shoe company Stuart Weitzman.

Analysts described Kate Spade as a good fit for Coach.

"We like the complementary product assortments, complementary customer bases, potential for synergies," said Mark Altschwager at Robert W. Baird & Co.