Rumoured merger talks with Coach boost Burberry stock

Burberry Group Plc shares rose the most in almost eight months after rumours broke about a potential merger of the quintessentially British luxury fashion company with equally upscale American Coach.

On Friday, financial blog ‘The Betaville’ reported that Coach Inc. would be considering merging with the British trench coat maker, quoting sources close to the matter. The reported price tag for the deal would be as much as 20 billion dollars.

As soon as this news went live, Coach Inc.'s stock (COH.N) rose 3.5 percent in pre-market trading, while Burberry Group PLC's shares (BRBY) gained 7.7 percent in London. Betaville also hinted that Coach would be working with Evercore on the possible Burberry merger.

According to the financial blog – which covers deals and mergers – the US handbags maker would have been working with financial advisers at Evercore for several weeks on a possible deal.

On the back of the news, Burberry shares traded 3 percent higher at 1,494 pence at 1:59 p.m. in London after rising as much as 8.1 percent, the biggest intraday gain since Feb. 26, reported Bloomberg. Meanwhile, Coach traded up by 1 percent from Thursday’s close in New York.

Commenting on the report, Exane BNP Paribas analyst Luca Solca said in a note to market that “A merger of Coach and Burberry would primarily be a merger of problems.” Solca further added that “M&A history in luxury has shown that mergers don’t obviously help in regaining brand traction and desirability.”

Reuters however reported that Burberry and Coach are not in active merger talks, citing sources familiar with the matter who reacted on Friday to Betaville’s report.

"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 when contacted by Reuters.

Image:Coach Web