* Deal for $21.75 per share
* Wolverine to buy brands like Stride Rite and Keds
* Blum Capital and Golden Gate to buy Payless
By Mihir Dalal and Ranjita Ganesan
May 1 The maker of Hush Puppies is teaming up
with two private equity firms to buy Collective Brands Inc
in a $1.32 billion deal that will split Collective's
shoe brands from its Payless ShoeSource retail business.
Wolverine Worldwide Inc, along with Blum Capital
Partners and Golden Gate Capital, will pay $21.75 for each
Collective Brands share - a 4.7 percent premium to the stock's
close on Monday.
The deal will see Blum Capital and Golden Gate take over
Payless ShoeSource, one of the largest footwear retailers in the
world, and Collective's international licensing business. The
businesses together had sales of about $2.4 billion last year.
"The Payless business' operating margins are still well
below historical levels and private equity typically can improve
efficiencies and margins so the deal makes a lot of sense,"
Monness, Crespi, Hardt & Co analyst Jim Chartier said.
Collective's remaining businesses, consisting of the Sperry
Top-Sider, Saucony, Stride Rite and Keds brands, will stack up
with Wolverine Worldwide's brands like Merrell, Hush Puppies,
and Caterpillar Footwear.
Wolverine, which reported fiscal 2011 sales of $1.41
billion, said the addition of the acquired brands will create a
company with annual sales of $2.5 billion.
The company's long established distribution relationships
and international infrastructure will help Collective's brands
grow faster in international markets, Wolverine CEO Blake
Krueger said on a call with analysts.
Analyst Chartier said the deal gives Wolverine, which has
one of the best international distribution networks, an
opportunity to grow sales by taking Sperry and Saucony overseas.
Collective Brands, led by CEO Michael Massey, is in the
midst of a turnaround and said in August it would close nearly
500 Payless stores over the next three years.
The stock, which has doubled since the company announced it
would conduct a strategic review in August, has been recently
propped up by media reports linking South Korean retailer E-Land
and Wolverine with takeover interest in Collective Brands.
Wolverine said the deal, seen closing later this year, will
have a minimal impact on its 2012 results, but is expected to
add 25 cents to 40 cents per share to its earnings in 2013.
Including debt, the deal is valued at about $2.0 billion.
Perella Weinberg Partners and Sullivan & Cromwell LLP
advised Collective Brands, while Wolverine Worldwide was advised
by Robert W. Baird and Barnes & Thornburg LLP. Kirkland & Ellis
LLP is the legal advisor to Blum Capital and Golden Gate
Collective Brands shares were trading at $21.18 on Tuesday
on the New York Stock Exchange.