A consortium comprised of Wolverine Worldwide, Blum Capital Partners and Golden Gate Capital agreed Tuesday to buy Collective Brands for $21.75 a share, or about $2 billion, including debt. Wolverine Worldwide is buying Collective Brands’ Performance + Lifestyle Group, while Blum Capital and Golden Gate will jointly acquire the operations of Payless ShoeSource and Collective Licensing International. The three firms (Wolverine, Blum and Golden Gate) have also formed an acquisition company to buy Collective Brands. The deal is expected to close late in third quarter or early in fourth quarter.
Collective Brands, Inc. (NYSE: PSS) and a consortium comprised of Wolverine Worldwide (NYSE: WWW), Blum Capital Partners and Golden Gate Capital today announced that they have entered into a definitive agreement under which Collective Brands will be acquired for $21.75 per share in cash, or a total of approximately $2.0 billion, including the assumption of debt. The purchase price represents a 104% premium to the 30-day volume weighted average trading price prior to the August 24, 2011 announcement that Collective Brands’ Board of Directors, together with management, would conduct a review of strategic and financial alternatives.
Upon closing, which is expected to occur late in the third quarter or early in the fourth quarter of the current calendar year, Wolverine Worldwide will acquire Collective Brands’ Performance + Lifestyle Group (PLG), which includes the wholesale and retail operations of the Sperry Top-Sider®, Saucony®, Stride Rite® and Keds® brands, and will continue to operate out of Lexington, Massachusetts. PLG had revenue of more than $1 billion in the fiscal year ended January 31, 2012.
Investment firms Blum Capital and Golden Gate will jointly acquire the operations of Payless ShoeSource and Collective Licensing International (CLI), which together will operate as a standalone entity. Payless will continue to be headquartered in Topeka, Kansas and CLI in Englewood, Colorado. Payless and CLI had combined revenue of approximately $2.4 billion in the fiscal year ended January 31, 2012, operating over 4,300 Payless retail stores globally at year end.
Wolverine Worldwide, Blum Capital and Golden Gate have formed an acquisition company that is acquiring Collective Brands.
“I am pleased with the outcome of this comprehensive strategic and financial review process,” said Michael J. Massey, Chief Executive Officer of Collective Brands. “Over the course of many months, the Collective Brands’ Board of Directors, working together with management and our financial and legal advisors, evaluated a number of alternatives to further enhance shareholder value. The transaction we are announcing today, which was unanimously approved by our Board of Directors, delivers substantial, immediate value to our shareholders and is a clear reflection of the quality of our businesses. We expect that following the closing of the transaction, both Payless ShoeSource and our Performance + Lifestyle brands will be positioned for growth and success over the long term.”
“Our Company is thrilled to add these four iconic brands to our proven global platform,” said Blake W. Krueger, Wolverine Worldwide Chairman and CEO. “This transaction provides dynamic portfolio expansion and diversification, and significant additional horsepower in five of our targeted growth areas – women’s, athletic, casual, kid’s and retail. 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.”
“We are very pleased to be acquiring one of the largest footwear retailers in the world,” said Josh Olshansky, a Managing Director at Golden Gate Capital. “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. We look forward to having Payless join our portfolio of great retail brands, and to supporting the leadership team as they continue the successful turnaround that is already underway.”
“Having been a core investor in Collective Brands for many years, we are excited about the prospect of continuing our relationship with the Company as it moves into its next chapter, and we are very pleased to have partnered with Golden Gate and Wolverine to position these businesses for future success,” said David Chung, a Partner at Blum Capital. Doug Dossey, a Managing Partner at Blum Capital, added, “We are excited about the prospects of Payless and look forward to working with the management team to support the turnaround strategy put in place last year. At closing, Payless will be well capitalized with a strong balance sheet and have the financial flexibility to take advantage of its numerous growth opportunities both domestically and overseas.”
The transaction is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, and the approval of the Collective Brands’ shareholders.
Perella Weinberg Partners LP is the financial advisor to Collective Brands, and Sullivan & Cromwell LLP is the Company’s outside legal counsel. Wolverine’s Worldwide’s financial advisor is Robert W. Baird and Co.; Kirkland & Ellis LLP is legal advisor to Blum Capital and Golden Gate Capital, and Barnes & Thornburg LLP is legal advisor to Wolverine Worldwide.
Wolverine World Wide received financing commitments from JP Morgan Chase Bank, N.A. and Wells Fargo Bank, National Association. Blum Capital and Golden Gate Capital received a commitment for a revolving credit facility from the Retail Finance Division of Wells Fargo Capital Finance, part of Wells Fargo & Company (NYSE: WFC).
About Collective Brands
Collective Brands, Inc. is a leader in bringing compelling lifestyle, fashion and performance brands for footwear and related accessories to consumers worldwide. Collective Brands, Inc. is the holding company for Payless ShoeSource, Collective Brands Performance + Lifestyle Group, and Collective Licensing International. Payless is dedicated to providing great value on trend-right styles of footwear and accessories for the entire family to enjoy and offers customers a range of well-recognized brands such as Dexter®, Airwalk®, Champion®, Above the Rim® and Smartfit®. The Collective Brands Performance + Lifestyle Group markets performance and lifestyle branded footwear sold primarily through wholesale and retail under well-known brand names including Sperry Top-Sider®, Saucony®, Stride Rite® and Keds®. Collective Licensing International is a leading youth lifestyle marketing and global licensing business. Information about, and links for shopping at, each of Collective Brands’ units can be found at www.collectivebrands.com.
About Wolverine Worldwide
With a commitment to service and product excellence, Wolverine World Wide, Inc. is one of the world’s leading marketers of branded casual, active lifestyle, work, outdoor sport and uniform footwear and apparel. The Company’s portfolio of highly recognized brands includes: Merrell®, Hush Puppies®, Wolverine®, Sebago®, Cushe®, Chaco®, Bates®, HYTEST®, and Soft Style®. The Company also is the global footwear licensee of popular brands including CAT®, Harley-Davidson® and Patagonia®. The Company’s products are carried by leading retailers in the U.S. and globally in more than 190 countries and territories. For additional information, please visit our website, www.wolverineworldwide.com.
About Blum Capital Partners
Blum Capital Partners is a San Francisco-based public strategic block and private investment firm with approximately $2 billion of equity capital under management. Blum Capital Partners was founded in 1975 and has invested in a wide variety of businesses, including through multiple going-private transactions. Throughout its history, Blum has demonstrated its expertise in proactively identifying attractive businesses to own, determining the most favorable ways to invest in those businesses across the public/private spectrum and helping to drive value creation as an active, engaged partner to management teams.
About Golden Gate Capital
Golden Gate Capital is a San Francisco-based private investment firm with approximately $12 billion of capital under management. The principals of Golden Gate have a long and successful history of investing across a wide range of industries and transaction types, including going-privates, corporate divestitures, and recapitalizations, as well as debt and public equity investments. Golden Gate is one of the most active investors in leading brands in the retail and restaurant sectors. Representative investments include California Pizza Kitchen, Eddie Bauer, J.Jill, Pacific Sunwear, Express, Zales, Romano’s Macaroni Grill, and On the Border Mexican Grill. For additional information, visit www.goldengatecap.com.