The maker of the quintessential New York handbag is taking over its younger rival in a deal worth $2.4bn (£1.85bn)
The 76 year-old Coach Inc is offering $18.50 per share in cash for Kate Spade & Co to diversify its brands.
Coach’s chief executive Victor Luis is aiming to create a multi-name fashion house and said Kate Spade was popular with millennials.
He said the deal “is an important step in Coach’s evolution as a customer-focused, multi-brand organisation”.
Kate Spade was established in 1993 by former journalist Kate Brosnahan Spade. It grew quickly and was picked up by upmarket US stores such as Saks Fifth Avenue and Neiman Marcus.
Although Coach and Kate Spade sell shoes and clothing – the latter is a favourite of the Duchess of Cambridge – both are best-known for their handbags, which appeal to different customers.
Prices for a Kate Spade tote bag starts at upwards of $150 and go up to around $450. For Coach, the cheapest tote costs approximately $285 but can rise to as much as $2,500.
Mr Luis, who took over as chief executive in 2014, has been working to expand Coach’s lines and two years ago acquired shoe company Stuart Weitzman.