Wolverine World Wide Inc. (WWW), one of the leading designers, manufacturers and marketers of branded footwear and apparel, announced that it has sealed the acquisition of the Performance + Lifestyle Group business (the "PLG Business") of Collective Brands Inc (:PSS) for $1.24 billion.
Earlier, Wolverine partnered private equity firms, Blum Strategic Partners and Golden Gate Capital Opportunity Fund, in order to acquire Collective Brands. Per the terms of the merger agreement, Wolverine agreed to acquire Collective Brands’ Performance + Lifestyle Group (PLG) unit. The other two units, Payless ShoeSource and Collective Licensing International, will be jointly taken up by Blum Capital and Golden Gate.
The PLG unit sells footwear and related products, both wholesale and retail, for children and adults under popular brands which include Stride Rite, Sperry Top-Sider, Saucony, and Keds, and generated approximately $1 billion in revenue in fiscal 2011.
Wolverine is focusing on long-term strategic initiatives to drive profitability, and we expect the acquisition to provide ample opportunities to Wolverine for boosting its growth prospects while facilitating the company in enhancing its portfolio of brands.
Going ahead, the company expects earnings dilution in the range of 25 cents to 30 cents a share for the rest of fiscal 2012. However, Wolverine added that the action will be accretive to the earnings of fiscal 2013 and 2014 in the range of 35 cents to 50 cents and 60 cents to 80 cents, respectively. Moreover, total revenue is expected in the range of $1.46 billion – $1.50 billion, reflecting a year-over-year growth of 3.6% to 6.4%.
Currently, we are maintaining a long-term ‘Neutral’ recommendation on the stock. However, Wolverine, which competes with Deckers Outdoor Corporation (DECK) and Skechers USA Inc. (SKX), has a Zacks #4 Rank that translates into a short-term ‘Sell’ rating as secular headwinds act as short-term deterrents for the stock.
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