Collective Brands Inc., which owns Payless ShoeSource as well as multiple iconic shoe brands, will be split in two by multiple buyers in a purchase valued at $2 billion. Wolverine Worldwide, Blum Capital and Golden Gate Capital formed an acquisition company to buy Collective for $21.75 a share, in a deal that is predicted to close early in Q4. The price represents a 104% premium on Collective’s 30-day average stock price before the company's announcement that it was looking into a strategic and financial shift for its operations on August 24, 2011.
In February, the company said it suffered a net loss of $154.1 million for the full fiscal year, after shutting the doors of 352 Payless and Stride Rite stores.
Blum and Golden Gate will get Payless and Collective Licensing International, which includes more than 4,300 Payless stores globally, and brought in $2.4 billion in revenue last year.
Wolverine Worldwide will end up with Collective’s Performance + Lifestyle Group, which includes brands like Sims, Vision Street Wear and Airwalk. The transaction is expected to have minimal net impact on Wolverine's 2012 results, but is expected to generate earnings per share accretion in the ranges of $0.25 to $0.40 in 2013 and $0.50 to $0.70 in fiscal 2014.
“This significant acquisition is an incredibly positive statement about the strength of our Company, our proven business model and confidence in our ability to grow both existing and newly acquired brands around the world,” said Don Grimes, Senior Vice President and Chief Financial Officer. “This transaction, because of both the significant opportunities for future growth and the historically low interest rate environment, promises to deliver meaningful earnings accretion and generate a very attractive return for Wolverine shareholders. Our historically strong cash flow, combined with the incremental profitability and cash flow of the newly acquired brands, will give us the ability to aggressively reduce debt over the next few fiscal years.”
For Wolverine's full press release on its acquisition, click here.