Collective Brands Said to Select Wolverine Over E-Land
Collective Brands Inc. (PSS), owner of the Payless ShoeSource chain, selected a group made up of Wolverine World Wide Inc. (WWW) and Golden Gate Capital Corp. as the leading contender to buy the company, said two people with knowledge of the matter.
The acquisition may be announced early this week, said the people, who declined to be identified because the talks are private. The Wolverine-Golden Gate offer values Collective Brands at $21 to $22 a share, and is likely to be chosen over a bid from South Korean retailer E-Land Group, the people said. The decision isn’t final and could change at the last minute as the companies work out contract terms and financing, they said.
The buyers will gain Collective Brands’ Sperry Top-Sider, Stride Rite, and Keds lines and the chance to continue a turnaround at the U.S. Payless stores, where sales fell after the company tried to introduce more expensive offerings, said Jim Chartier, an analyst at Monness Crespi Hardt & Co. in New York. Wolverine owns the Merrell and Hush Puppies shoe brands, while San Francisco-based Golden Gate has invested in brands including Eddie Bauer and J. Jill.
Collective Brands fell 2 percent to $20.77 at the close in New York. The shares have gained 45 percent this year. Wolverine rose 6.6 percent to $41.95.
A takeover of Collective Brands would be the largest of a U.S. footwear company since VF Corp. (VFC) paid $1.97 billion for Timberland Co. last September, Bloomberg data show. Greensboro, North Carolina-based VF paid 12.3 times earnings before interest, taxes, depreciation and amortization, compared with Collective Brands’s April 27 enterprise value to Ebitda multiple of 15.2, the data show.
Spokespeople for Collective, Wolverine and Golden Gate declined to comment on the potential deal. E-Land spokesman Ro Byung Gyoo couldn’t be reached.
After reporting a $35 million loss in August, Collective Brands said it would review strategic alternatives and shut 475 stores in the following three years. The Topeka, Kansas-based company’s loss for the year ended Jan. 28 was $164.5 million compared with a $112.8 million profit a year earlier.
Payless ShoeSource Inc. became Collective Brands after acquiring Stride Rite Corp. in August 2007. Its retail operations, which included about 3,500 Payless ShoeSource outlets in the U.S. last fiscal year, accounted for about 78 percent of revenue, according to a filing with the Securities and Exchange Commission. The remainder came from its wholesale business, which supplies Saucony, Sperry Top-Sider, Stride Rite and Keds shoes to retailers.
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