Coach Scoops Up Shoemaker Stuart Weitzman for $574 Million The move is designed to further diversify the handbag maker's sales.

Coach has agreed to pay as much as $574 million to buy women's footwear maker Stuart Weitzman, scooping up the asset from Sycamore Partners in a move that will further diversify the handbag maker's sales.

Under the terms of the deal, Coach agreed to pay about $530 million in cash for the footwear company, with up to $44 million in future payments due to Sycamore Partners if certain revenue targets are achieved over the three years following the close of the acquisition. Coach, which expects the deal to close by May, said it will finance the deal with cash on hand or other sources of financing available in the credit and capital markets.

For Coach, the deal will provide diversification away from handbags, where it does a bulk of its business. Of the $4.8 billion in sales Coach pulled in for its latest fiscal year, 55% was derived from women's handbags. Only 9%, or about $426 million, was from "all other products," which includes footwear, jewelry, gloves, scarves and hats. Stuart Weitzman, which operates over 110 retail stores in the U.S. and abroad, generated about $300 million in revenue for the 12 months ended September 30.

"Over the medium term, we look forward to advancing the Stuart Weitzman brand's global development, especially by leveraging Coach's international infrastructure and expertise in handbags and accessories," said Coach Chief Executive Victor Luis. "In addition, we look forward to benefiting from Stuart Weitzman team's expertise in footwear development where they're proven leaders in fashion and fit."

The sale represents a fast turnaround for retail-focused Sycamore, which has owned the brand for less than a year. It acquired Stuart Weitzman and other assets when it paid about $2.2 billion to buy The Jones Group in April 2014. Just a few days after that deal was completed, Sycamore moved quickly to form Stuart Weitzman as an independent company, rather than keeping it as a division of The Jones Group.

The deal also comes at a time when Coach is facing some challenges in the luxury market. The company, which pulls in a heavy chunk of its North American sales from factory outlets, is trying to lift the perception of its brand as it angles to better compete with competitors including Michael Kors and Kate Spade . That turnaround hasn't been achieved quite yet, with the fiscal first-quarter sales Coach reported in late October sliding 9% from a year ago, including a steep 19% drop in North America.