Burberry and Coach not in active merger talks, sources say

Britain’s Burberry and U.S. firm Coach are not in active merger talks, sources familiar with the matter said on Friday, in reaction to a report that suggested the two fashion companies were considering a tie-up.

Burberry Prorsum – Spring-Summer2016 – Womenswear – Londres – © PixelFormula

“This is completely speculative. There are no negotiations underway, Burberry is not talking to Coach,” one of the sources said. Another source with first-hand knowledge of the matter said such a plan could not be on the cards since the two companies pursued very different strategies.

Burberry declined to comment.

Burberry and Coach shares rose sharply after financial blog Betaville said, citing sources, that Coach was working with investment bank Evercore on a potential merger with Burberry.

Burberry shares rose nearly 5 percent on Friday and by 1315 GMT they were up 3.51 percent at 1,501 pence valuing the British company at 6.43 billion pounds ($7.84 billion).

“Contrary to Coach, most of the efforts at Burberry in the past 20 years have gone in the direction of elevating the brand and moving it into mega-brand price territory, rather than squarely into accessible luxury,” Exane BNP Paribas analyst Luca Solca.

“A merger of Coach and Burberry would primarily be a merger of problems,” he said, adding there were few examples of mergers in the sector that had successfully helped a brand regain momentum and drive up sales.

Burberry reported a drop in first-half sales on Tuesday, hitting its shares as weak demand from U.S. department stores offset a surge in sales in its home market as tourists took advantage of a lower pound.

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