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Kate Spade Completes Japan Business Buy

The Fifth & Pacific Cos. Inc.- owned brand acquired the 51 percent interest held by KSJ Co. Ltd., a subsidiary of Sanei International Co. Ltd.

Kate Spade LLC said Wednesday that it bought out its Japanese joint venture partner.

This story first appeared in the November 1, 2012 issue of WWD.  Subscribe Today.

The Fifth & Pacific Cos. Inc.-owned Kate Spade acquired the 51 percent interest held by KSJ Co. Ltd., a subsidiary of Sanei International Co. Ltd. The purchase price for the Kate Spade Japan buyout, including debt repayment, related transaction fees and use of Kate Spade Japan’s cash on hand, totaled $47.6 million.

Kate Spade is also required, during the fourth quarter, to make a post-closing asset adjustment payment to Sanei in conjunction with the buyout. Kate Spade said it does not expect the post-closing payment to be material. It also doesn’t anticipate the buyout to have an impact on adjusted earnings before interest, taxes, depreciation and amortization for 2012.

The Japan buyout is part of Kate Spade’s international expansion push, which includes recent store openings in the U.K., Dubai, Kuwait and Brazil. The company intends to extend its retail expertise in Japan to its business in the rest of Asia.

According to the New York-based company, Kate Spade Japan was formed between Sanei and Kate Spade in August 2009. In Japan, it operated the Kate Spade and Jack Spade businesses. The company will continue to operate those businesses in Japan through its subsidiary.

For Kate Spade Japan’s fiscal year ended Aug. 31, net sales were about $88 million, an increase from the prior fiscal year of 20 percent on a local currency basis. Excluding charges, the Japanese company recorded adjusted operating margins in the high-single digits and EBITDA in the lowdouble digits, according to the company. Kate Spade Japan, which distributes its products mainly through 53 points of sale, said more than 90 percent of net sales in the Japan business last year came from the direct-to-consumer business.

Kate Spade, which has been a bright spot for Fifth & Pacific, recently reported third-quarter adjusted operating profits of $9 million, up from $5 million in the year-ago period, as sales jumped 35.1 percent to $102 million.