Collective Brands Inc. (PSS) was sued by an investor seeking to block the shoe retailer’s proposed sale to Wolverine World Wide Inc. (WWW), Blum Capital Partners LP and Golden Gate Capital Corp. for about $2 billion including debt.
Gregory Dusablon contends in a Delaware Chancery Court complaint made public today in Wilmington that Collective’s directors are duty-bound to get the best price for the company and wrongly accepted too low a bid. The buyout group offered $21.75 a share in cash.
The deal “deprives Collective Brands’ public shareholders of the ability to participate in the company’s long term prospects,” Dusablon said in court papers. He asked a judge to halt the transaction and award damages.
Collective, based in Topeka, Kansas, sells footwear under brands including Sperry Top-Sider, Saucony, Stride Rite and Keds. The deal will combine those brands with Wolverine’s Sebago, Caterpillar and Hush Puppies brands, the Rockford, Michigan-based buyer said in a May 1 statement.
A takeover of Collective would be the largest of a U.S. footwear company since VF Corp. (VFC) paid $1.97 billion for Timberland Co. last September, according to data compiled by Bloomberg. The transaction is expected to be completed in the third or early fourth quarter, Collective said.
Collective said after reporting a $35 million loss in August that it would review strategic alternatives and shut 475 stores in the following three years. The 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.
JPMorgan Chase & Co. and Wells Fargo & Co. have committed to provide $1.73 billion in loans to back the deal. The financing comprises a $900 million senior secured term loan, a $200 million revolving line of credit, a $375 million bridge facility and a $250 million portion that will be secured by the company’s receivables, Collective said May 2 in a regulatory filing.
Stephanie Waugh, a spokeswoman for Collective, didn’t immediately respond to a phone call or e-mail seeking comment on the lawsuit.
The case is Dusablon v. Collective Brands, CA7498, Delaware Chancery Court (Wilmington).
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