In some good news for the distressed US retail sector, on Monday morning handbag retailer Coach confirmed long-running speculation, when it announced that it would acquire peer Kate Spade in a $2.4 billion deal. Coach will pay Kate Spade shareholders $18.50 a share in cash, a 28% premium to Kate’s closing price as of Dec. 27, the last trading day before the Wall Street Journal first reported that Kate was exploring a sale of the company after coming under pressure from an activist shareholder. In February, Kate Spade confirmed it was reviewing such options in February.

Coach Chief Executive Victor Luis said the companies hope the deal will “unlock Kate Spade’s largely untapped global growth potential,” and he described the deal as “an important step in Coach’s evolution.”

Some more details from the press release:

• The acquisition expected to be accretive in fiscal 2018 and to reach double-digit accretion by fiscal 2019 on a non-GAAP basis, and transaction has been unanimously approved by boards of directors of Kate Spade & Company and Coach Inc, and is not subject to a financing condition
• The deal is expected to reach double-digit accretion by fiscal 2019 on a non-GAAP basis
• Coach has secured committed bridge financing from BofA Merrill Lynch, and the $2.4 billion purchase price expected to be funded by a combination of senior notes, bank term loans and approximately $1.2 billion of excess Coach cash.
• Coach believes company can realize a run rate of approximately $50 million in synergies within three years of deal closing, i.e. even more terminations coming.
• Cost synergies will be realized through scale and inventory management, optimization of Kate Spade's supply chain network; Coach plans to reduce sales in Kate Spade's wholesale disposition and online flash sales channels.
• Coach's financial advisor is Evercore Group L.L.C.; Kate Spade & Company's financial advisor is Perella Weinberg Partners LP

As the WSJ adds, both companies, based in New York, have battled a retail environment that has been challenging, especially for designers with significant exposure to department stores, where traffic has declined. U.S.-based luxury brands are also negatively affected by a strong U.S. dollar.

It notes that sales at Coach have started to grow again as it pulled back from department stores and dialed back promotions. The company said it plans to do the same for Kate Spade after the deal closes, which is expected to occur in the third quarter.

Kate Spade shares rose 8.5% to $18.41 in recent premarket trading; they had risen as high as $24 in recent months on hopes of a substantial M&A premium.