Skechers U.S.A. Inc. shareholders like the thought of takeover by VF Corp. — and a hefty premium — but at least some on Wall Street are scratching their heads over reported talks between the two companies.
Shares of Skechers rose 6 percent to $26.86 in late-day trading following media reports that VF was contemplating paying $40 a share for the company — or about $5.6 billion. VF stock was also up, rising 1.7 percent to $73.16 as the market approached its close.
With a market capitalization of over $28.5 billion, VF has the muscle to do the deal.
And Credit Suisse analyst Michael Binetti said a buyout could make financial sense. It would price Skechers at 10 times its projected earnings before interest, taxes, depreciation and amortization for 2019.
But strategically, the deal seemed like more of stretch.
Binetti said the perfect fit for VF would be an active lifestyle brand that worked across apparel, footwear and accessories, catered to both genders, could command premium prices and had the opportunity to expand both globally and online.
“While Skechers checks some of these boxes, we think the biggest strategic impasse is the fact that VF Corp. just worked very hard to significantly reduce its exposure to the U.S. department store and mid-tier retail channel — which is still Skechers’ primary channel of distribution,” the analyst said.
In August, VF decided to split itself into two companies in a deal that will spin off its jeans and outlet businesses in a tax-free transaction expected to close this year.
The new jeans firm will be called Kontoor and stay in North Carolina, while VF moves to Denver and builds off an $11 billion revenue base, including The North Face, Timberland, JanSport, Smartwool, Altra and Eagle Creek.
Steve Rendle, VF’s chairman, president and chief executive officer, said in August: “We are now ideally positioned to create two independent, leading, global companies. In alignment with our strategic plan, the decision to separate these businesses will allow VF to sharpen its focus as a consumer-centric and retail-minded organization anchored in activity-based lifestyle brands.”
Representatives for both VF and Skechers did not immediately respond to WWD queries Thursday afternoon.