ROCKFORD — A consortium of companies including casual footwear maker Wolverine World Wide Inc. today announced plans to acquire Collective Brands Inc. for nearly $2.0 billion, including the assumption of debt.
The long-rumored transaction will be "transformational" and a "game changer" for Rockford, Mich.-based Wolverine, executives told analysts on a conference call following the announcement. Known for its Hush Puppies and Merrell brands, Wolverine joined with private equity firms Golden Gate Capital and Blum Capital Partners to acquire Topeka, Kan.-based Collective Brands, maker of Keds, Sperry Top-Sider and other footwear. Collective Brands also owns the 4,300-store Payless ShoeSource retail business as well as a global licensing business.
Upon close of the deal, Collective Brands’ divisions will be split up, with Wolverine acquiring Collective Brands’ Performance + Lifestyle Group for a purchase price of approximately $1.23 billion. PLG had annual revenues of $1 billion in the fiscal year ended Jan. 31, 2012, and includes wholesale and retail operations of Sperry Top-Sider, Saucony, Stride Rite and Keds brands.
Investment firms Blum Capital and Golden Gate Capital will jointly acquire the operations of Payless ShoeSource and Collective Licensing International. Combined, the two divisions had annual revenues of about $2.4 billion last fiscal year.
In a conference call with analysts, Wolverine CEO Blake Krueger said that the deal is “transformational” for the Rockford-based company, catapulting it from annual revenues of $1.4 billion to projected annual revenues of more than $2.5 billion.
“This is a historic moment for Wolverine,” Krueger said.
The PLG brands are mainly sold in North America. Krueger said Wolverine expects to leverage its global distribution network to “slingshot PLG to growth.”
Krueger told analysts that the deal will help Wolverine plug some openings in its existing lineup, including in the athletic shoe and kids market. Of the brands in the acquisition, he said the most potential comes from Sperry Top-Sider.
“The brand is simply on fire right now,” Krueger said, noting the brand was “under-distributed with tremendous potential internationally.”
Wolverine CFO Don Grimes told analysts that Wolverine plans to pay the expected $1.23 billion for PLG through cash on hand and debt. Wolverine reported it has financing commitments from JP Morgan Chase Securities LLC and Wells Fargo Securities LLC.
Barnes & Thornburg LLP is acting as Wolverine’s legal adviser on the transaction. Milwaukee-based Robert W. Baird & Co. is serving as financial adviser to Wolverine on the deal.
Grimes said PLG will maintain its headquarters in Lexington, Mass. and will plug into Wolverine as a new operating group. He said the company is aiming for the deal to close by July 31.
“In short, this transaction is truly a game changer for Wolverine World Wide shareholders and leverages our global business model and infrastructure to deliver … a very attractive return,” Grimes said.