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Collective Brands Inc. has inked a deal to be acquired by a consortium of investors that includes Wolverine World Wide Inc., Blum Capital Partners and Golden Gate Capital in a transaction valued at $2 billion, including the assumption of debt.
That translates to a cash component of $1.32 billion, or $21.75 a share. The deal is expected to close in the back half of 2012. While Collective’s board has approved the transaction, the deal is still subject to approval by shareholders. Following the closing of the deal, Collective’s current businesses will be split into separate ownership.
Collective’s Performance + Lifestyle Group will be acquired by Wolverine in a deal valued at slightly over $1.2 billion. The group, which includes wholesale and retail operations of the Sperry Top-Sider, Saucony, Stride Rite and Keds brands, posted revenue of more than $1 billion for the fiscal year ended Jan. 31.
Blake W. Krueger, Wolverine’s chairman and chief executive officer, said, “This transformational acquisition positions our business for accelerated long-term growth, both domestically and internationally, and adds to our strong model for delivering significant shareholder value.”
The four brands acquired from Collective will join Wolverine’s existing portfolio that includes Merrell, Hush Puppies, Wolverine, Sebago and Caterpillar Footwear.
The combined firm under the Wolverine umbrella will create a $2.5 billion global footwear and lifestyle brand powerhouse.
The Payless ShoeSource and Collective Licensing International operations will be acquired by Blum and Golden Gate for slightly less than $800 million. The two private equity firms will each hold a 50 percent stake in the soon-to-be stand-alone entity. The Collective Licensing arm supports components of the Payless retail business. Payless and Collective Licensing had combined revenues of $2.4 billion for the fiscal year ended Jan. 31.
Collective put itself up for sale during the summer of 2011. It was formed in 2007 when Payless acquired Stride Ride Corp. for $800 million. The combined entity was renamed Collective Brands’ Performance and Lifestyle Group.
According to a financial source, Blum Capital, the second-largest shareholder of Collective as well as a shareholder since 2007, connected with Golden Gate for the deal and then later brought in Wolverine to form the consortium. The two private equity firms were primarily interested in just the Payless operation.
Golden Gate, in particular, has expertise in investments in specialty retail where they can provide operational know-how and guidance. Past and current specialty retail holdings include Eddie Bauer, Express, J. Jill, Pacific Sunwear and Zale Corp. The San Francisco-based private equity firm in October closed on $3.5 billion in commitments for its Series 2 round of fund-raising for the Opportunity Fund, a perpetual fund, that was started in 2007.
Josh Olshansky, a managing director at Golden Gate, said, “Payless is exactly the type of company in which we seek to invest — a strong brand with unparalleled global scale at an important inflection point in its evolution.”