New York handbag maker Coach is taking over its younger rival Kate Spade in a deal worth $2.4 billion.

Coach is offering $18.50 a share for Kate Spade in a bid to create a multi-brand fashion house.

Both companies are grappling with sliding sales at US department stores where their products have traditionally been sold.

Coach shares rose 4.6% in New York, while Kate Spade jumped 8.2%.

Image source Flickr

Coach was founded in 1941, while Kate Spade was established in 1993 by former journalist Kate Brosnahan Spade.

The handbag maker expanded quickly and its products stocked by upmarket retailers such as Saks Fifth Avenue and Neiman Marcus.

Although Coach and Kate Spade sell shoes and clothing both are best-known for their handbags.

Kate Spade’s handbags have found favor with millennials due to their subtle logos and quirky and colorful designs, including bags shaped like cats and cars.

Coach CEO Victor Luis said the acquisition would allow his company to target “a new customer segment”.

Prices for a Kate Spade tote bag starts at about $150 and rise to around $450. A Coach equivalent begins at about $285 but can rise to as much as $2,500.

Victor 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.