Payless ShoeSource to buy Stride Rite
Payless ShoeSource Inc. said Tuesday that it would buy shoemaker Stride Rite Corp. for about $800 million, adding Keds and other brands to its stable and expanding its retailer distribution.
The news sent shares of Stride Rite up more than 30% in extended trading, while Payless stock rose more than 4%.
The $20.50-a-share offer represents a 33% premium over Stride Rite’s closing price Tuesday.
The deal is expected to add to per-share earnings in fiscal 2008, the companies said in a joint statement.
The new company will be called Collective Brands Inc. and will operate three business units -- Stride Rite, Payless and an international brand licensing division called Collective Licensing International.
Payless bought Collective International this year for about $91 million to enter the brand development, management and licensing business. Collective International’s sport-inspired brands include Airwalk and Vision Street Wear.
Stride Rite owns or licenses brands such as Keds, Sperry Top-Sider and Tommy Hilfiger Footwear and also operates its own retail stores. Payless operates nearly 4,600 shoe stores.
On a conference call with analysts, Payless Chief Executive Matt Rubel said Stride Rite’s brands would not be sold at Payless stores.
Rubel will serve as CEO of the new company, which will be based in Payless’ hometown of Topeka, Kan.
On the call, Rubel said the new company would have “more brands, more distribution channels, expanded price points and greater customer reach.”
He also said the deal came at a time when U.S. consumers were placing increased value on brands.
The new company will focus primarily on the fast-growing children’s and casual footwear segments, Payless said. It will also seek to expand Stride Rite stores to off-mall retail locations such as outlets.
The companies forecast compound annual operating profit growth of more than 20% from 2006 to 2009. Payless stores should continue to achieve low-single-digit positive same-store sales, they said.
Stride Rite will keep its headquarters in Lexington, Mass., and Collective Licensing will be based in Denver.
Payless shares rose 4.2% to $33.25 in after-hours trading after closing down 27 cents at $31.90. Stride Rite shares rose 31% to $20.30 after closing up 27 cents at $15.45.
