Is Burberry Merging With Coach?

Burberry Group’s shares were up 6 percent today after reports from Betaville, a financial blog, claimed that Coach is possibly merging with the British company.

According to the site, Coach is “working with corporate financiers on a potential combination with Burberry to create a $20 billion luxury clothing giant.”

A Burberry spokesman declined to comment on market rumors and speculation.

Burberry shares were trading at 15.38 pounds, or $17.23 at current exchange, in afternoon trading in London.

Responding to the report, Exane BNP Paribas managing director Luca Solca said, “I find a merger of Coach and Burberry not likely. There would be little or no synergies to speak of — while problems would compound. Besides, it would be remarkable to have insiders sell shares just a few weeks ago if this had any substance. My view is that this is likely to be a red herring.

“A merger of Coach and Burberry would primarily be a merger of problems,” he added. “M&A history in luxury has shown that mergers don’t obviously help in regaining brand traction and desirability, while cost efficiency in the face of declining brand momentum are often just a way to run in order to stand still.”

Earlier this year, there was media speculation about Burberry being sold. The share price spiked because one shareholder had upped their stake.

Burberry tapped Marco Gobbetti as chief executive officer to replace Christopher Bailey, and Gobbetti commences his role in early 2017. Bailey, who has held the dual role of chief creative and CEO since May 2014, will retain his creative title and take on the new one of president.

The stock market has been awash in rumors and speculation this week over possible mergers and acquisitions in what has generally been a lackluster year for M&A activity in the retail and luxury goods sectors. Earlier this week in New York, rumors spread that Michael Kors was a possible takeover target, while there has been widespread speculation in the past that Kors could buy Coach, Coach could buy Kors, or PVH Corp. could buy Kors or Coach. The firms’ shares have seen a brief spike on each rumor, only to fall back again when the speculation has proven to be false.

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