Coach Inc. (COH) , the New York-based accessories maker, has agreed to acquire footwear business Stuart Weitzman Holdings LLC, also of New York, from private equity firm Sycamore Partners LLC for $530 million in cash, it said Tuesday morning.

If Stuart Weitzman hits certain revenue targets over the next three years, Sycamore could receive an additional $44 million in payments.

The deal will be financed with cash and alternative unspecified additional sources of financing and is expected to close in May.

Coach, while it generates cash, has seen its growth stall in recent years due to competition from such handbag retailers as Michael Kors Holdings Ltd. (KORS) and Kate Spade & Co. (KATE) .

The handbag maker has also struggled with its own rapid expansion, which led to a cycle of discounting that had the effect of maintaining growth but depleting profit margin.

The acquirer had about $4.8 billion in revenue and Ebitda of about $1.3 billion for the fiscal year ended June 28. For its current fiscal year ending June 30, 2015, it estimates that it will generate nearly $4.3 billion and Ebitda of close to $1 billion, according to numbers provided by Bloomberg.

Coach's chief executive Victor Luis has been on the job for about a year and has attempted to ween his company off promotions to regain margin and some of the brand's prestige lost over the years to being overly ubiquitous.

Using some of the availability on its balance sheet — including over $1 billion in cash, cash equivalents and short-term investments — to make a middle market acquisition of a potential growth brand is the latest move to regain relevance in a contested market.

Sycamore hired investment banks Goldman, Sachs & Co. (GS) and Citigroup Inc. (C) during the summer to shop Stuart Weitzman, a source had confirmed to The Deal in mid-August.

Sycamore, also based in New York, picked the brand up via a December 2013 acquisition of apparel conglomerate Jones Group Inc. for $2.2 billion.

The Stuart Weitzman part of that deal was to be financed with $220 million in debt and $165 million in equity, according to a February Moody's Investor Services Inc. report. That would equate to a valuation of about $385 million.

Jones Group had bought Stuart Weitzman in two transactions, acquiring a 55% stake in 2010 for $180 million and buying the remaining 45% in 2012 for $250 million.

The return for Sycamore partners — assuming that the deal is all cash without the assumption of debt — would mean an initial return to the PE firm of $310 million, or nearly 1.88 times the $165 million in equity invested.

If Stuart Weitzman achieves its revenue targets over the next three years, the total return on Sycamore's investment could reach 2.15 times.

The Tuesday morning announcement said Stuart Weitzman was achieving compound annual sales growth of 10%. It operates 47 retail stores in the U.S. and has 71 stores internationally, seven of which are directly owned and operated by Stuart Weitzman.

According to a February regulatory filing by Jones Group, Stuart Weitzman in 2013 had nearly $270 million in revenue, compared to almost $250 million in revenue in 2012, and about $234 million in revenue in 2011.

The shoe company had about $33 million in Ebitda in 2013, compared to roughly $45 million in Ebitda in 2012, and almost $45 million in Ebitda for 2011. Adjusted Ebitda for the company, meanwhile, was almost $53 million in 2013, while in 2012 it was $54 million and in 2011 it was nearly $50 million.

The $530 million price equates to a multiple of 16 times the $33 million in Ebitda Stuart Weitzman generated in 2013.

Perella Weinberg Partners LP provided financial advice to Coach.

Fried, Frank, Harris, Shriver & Jacobson LLP's Brian Mangino provided legal advice to the acquirer.

Goldman Sachs' David Friedland and Citigroup provided financial advice to Sycamore Partners. Winston & Strawn LLP provided legal advice to the seller.

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