Kate Spade New York said Wednesday it plans to buy its Japanese joint venture partner, Sanei International, out of their 51 percent share in the jointly owned company, Kate Spade Japan.
The expected purchase price range for the buyout including debt repayment and related transaction fees is estimated to be between $45 million and $50 million.
The move is part of Kate Spade’s international expansion initiative, which includes recent store openings in the U.K., Dubai and Kuwait, as well as further inroads into Brazil with additional store openings in Rio de Janeiro and São Paulo planned for this summer.
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Craig Leavitt, chief executive officer of Kate Spade New York, said, “Kate Spade New York has a long and successful history in the Asian market. We believe the brand has a unique ability to continue to grow internationally and be relevant to consumers around the world. In order to realize our international potential, we believe partially or wholly owned business models better enable us to connect more directly to our consumers, understanding and investing in their preferences and tastes more keenly. It is our strategy to build a global company to support what is already quickly becoming a global brand.”
Kate Spade is a division of Fifth & Pacific Cos. Inc.
The purchase is part of Kate Spade’s strategy to fully or partially own the majority of its Asia-based businesses. In May 2011, Kate Spade New York formed a joint venture in the China with the E-Land Group to create a major presence with the intention of expanding to nearly 300 points of distribution by 2020. In addition, Kate Spade New York said at the time it planned to buy back its Hong Kong South East Asia business from its long-term distribution partner in January 2014.
The acquisition of the Japanese business is expected to be completed this fall. The Japanese business accounts for Spade’s second-largest market outside of the U.S. Kate Spade has had a presence in Japan for the past 15 years and has experienced robust growth and increased brand awareness since it entered this venture in 2009. The company operates 52 points of sale, and expects to expand that number during the next few years.
For the fiscal year ended Aug. 31, Kate Spade Japan’s net sales were about $71 million, with operating margin in the high single digits and earnings before interest, taxes, depreciation and amortization margin (operating margin excluding depreciation and amortization) in the low double digits, according to the company. Kate Spade Japan’s direct-to-consumer business is greater than 90 percent of the total portfolio with strong year-over-year comp sales. In the last 12 months ended April, net sales have increased by about 20 percent.