US retailer Michael Kors to buy luxury shoemaker Jimmy Choo for $1.2 billion

US retailer Michael Kors has agreed to buy luxury

shoemaker Jimmy Choo for $1.2 billion, snapping up a British company

whose towering stilettos have been made famous by celebrity customers

from Princess Diana to Kendall Jenner.

The move comes

two months after rival handbag maker Coach struck a deal to buy quirky

fashion brand Kate Spade & Co, as so-called affordable luxury

companies look to go into new markets to try to boost flagging sales.

(Kate Spade designs atNew York Fashion Week in February 2016. /VCG Photo‍)

"Jimmy Choo is an iconic premier luxury brand that

offers distinctive footwear, handbags and other accessories," said

Michael Kors, honorary chairman and chief creative officer. "We admire

the glamorous style and trend-setting nature of Jimmy Choo designs."

Founded

by bespoke shoemaker Jimmy Choo in the east end of London in the 1990s,

Jimmy Choo Plc listed at 140 pence in 2014 and will sell out at 230

pence.

Its strong performance stands in contrast to

Michael Kors which has lost 65 percent of its market value since 2014

due to fierce competition at the more affordable end of the luxury

market and a drop in customers at department stores.

(Michael Kors' iconic wallet design /VCG Photo)

Michael Kors, which has tried to fight back by expanding

into dresses and menswear and its online business, said in May that

sales at stores established for more than a year fell 14 percent in its

fiscal fourth quarter.

Under the terms of the deal,

it will pay a premium of 36.5 percent to buy Jimmy Choo compared with

the British firm's share price before it was put up for sale.

Multi-Brand Strategy

Berenberg

analyst Zuzanna Pusz said the deal followed in the footsteps of Coach's

recent acquisition and showed US accessible luxury companies were

pursuing the multi-brand strategy found in Europe, where cash flows from

one large brand are reinvested into smaller but faster growing ones.

(People are lining up in front of a Coach store. /VCG Photo)

Pusz said it was probably a sensible move in the long term, with competition unlikely to wane anytime soon.

"Multiple

companies such as Jimmy Choo, Prada, Ferragamo and Cucinelli have gone

public over the past couple of years with the intention of financing

their retail expansion plans, thus accelerating their investments and

giving the luxury consumer globally more choice of brands anywhere they

go."

Jimmy Choo put itself up for sale in April after

its majority-owner JAB, the investment vehicle of Germany's billionaire

Reimann family, signaled its intention to focus on consumer goods

instead. JAB is also considering a sale of Bally International, the

Swiss luxury shoes and accessories company.

The deal

is the latest in a string of foreign takeovers of UK companies, as

buyers abroad take advantage of a drop in the value of sterling since

Britain voted to leave the European Union in June 2016.

Michael

Kors, which said it had JAB's backing for the deal, pledged to use its

own infrastructure to help Jimmy Choo grow further via store openings

and online.

Jimmy Choo will continue to be led by the

same management team, including Creative Director Sandra Choi who

joined the company at its inception.

Goldman Sachs

and JP Morgan acted for Michael Kors on the deal, while Merrill Lynch,

Citigroup, Liberum and RBC Europe acted for Jimmy Choo.