Luxury accessories design house Coach signed an agreement to acquire Kate Spade in a transaction valued at $2.4 billion. Bank of America Merrill Lynch will provide a bridge loan to support the transaction, which is expected to be funded by a combination of senior notes, bank term loans and approximately $1.2 billion of excess Coach cash.

The transaction represents a 27.5% premium to the unaffected closing price of Kate Spade’s shares as of December 27, 2016, the last trading day prior to media speculation of a transaction.

Victor Luis, CEO of Coach, said, “Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials. Through this acquisition, we will create the first New York-based house of modern luxury lifestyle brands, defined by authentic, distinctive products and fashion innovation. In addition, we believe Coach’s extensive experience in opening and operating specialty retail stores globally, and brand building in international markets, can unlock Kate Spade’s largely untapped global growth potential. We are confident that this combination will strengthen our overall platform and provide an additional vehicle for driving long-term, sustainable growth.”

The combination of Coach and Kate Spade will create a luxury lifestyle company with a more diverse multi-brand portfolio supported by significant expertise in handbag design, merchandising, supply chain and retail operations as well as solid financial acumen. Coach’s history and heritage, multi-channel, international distribution model, and seasoned leadership team uniquely position it to drive long-term sustainable growth for Kate Spade. Coach is focused on preserving Kate Spade’s brand independence as well as retaining key talent, ensuring a smooth transition to Coach.

Coach has secured committed bridge financing from BofA Merrill Lynch. The $2.4 billion purchase price is expected to be funded by a combination of senior notes, bank term loans and approximately $1.2 billion of excess Coach cash, a portion of which will be used to repay an expected $800 million six-month term loan. The transaction is expected to close in Q3/17, subject to customary closing conditions, including the tender of a majority of the outstanding Kate Spade shares pursuant to the offer and receipt of required regulatory approvals.

Coach’s financial advisor is Evercore Group, and its legal advisor is Fried, Frank, Harris, Shriver & Jacobson. Kate Spade’s financial advisor is Perella Weinberg Partners, and its legal advisor is Paul, Weiss, Rifkind, Wharton & Garrison.