New Company, to be Named Collective Brands, Inc., will Bring
Together Differentiated Brands, Complementary Businesses and
Strengths to Accelerate Retail, Wholesale and Licensing Growth
TOPEKA, Kan. and LEXINGTON, Mass., May 22 /PRNewswire-FirstCall/ --
Payless ShoeSource, Inc. (NYSE:PSS) and The Stride Rite Corporation
(NYSE:SRR) announced today the signing of a definitive agreement by
which Payless will acquire Stride Rite, which owns or licenses such
key upscale brands as Stride Rite(R), Keds(R), Sperry Top-Sider(R),
Tommy Hilfiger Footwear(R), Saucony(R) and Robeez(R), for
approximately $800 million plus the assumption of Stride Rite debt.
The all-cash offer of $20.50 per share represents a 32% premium
over Stride Rite's average stock price over the past 90 days and
was approved unanimously by the boards of directors of both
companies. Concurrent with the closing of the transaction, Payless
ShoeSource intends to rename the company Collective Brands, Inc.
and, as a holding company, will operate three standalone business
units. Collective Brands is expected to have stronger growth
potential than either Payless or Stride Rite alone as a result of a
strong portfolio of well-known footwear, lifestyle and athletic
brands and competitive advantages stemming from increased scope and
scale. The new Collective Brands holding company will operate a
powerful business model with leading retail, wholesale, licensing
and e-commerce channels. The three highly complementary and
separate business units have distinct missions in terms of their
product offering, distribution channels, and target customer base:
-- Payless stores, focusing on democratizing fashion and design in
footwear and accessories through its nearly 4,600 store retail
chain; -- Stride Rite, centering on lifestyle and athletic branded
footwear and high-quality children's footwear sold primarily
through wholesaling arrangements and more than 300 Stride Rite
store locations; and, -- Collective Licensing International,
specializing in brand management and global licensing of its
expanding portfolio of youth, lifestyle and high-quality fashion
athletic brands. Terms of the Transaction Under the terms of the
transaction, Payless ShoeSource would acquire all of the
outstanding shares of Stride Rite for approximately $800 million
plus assumed debt. The acquisition will be financed through
existing cash resources and committed new financings. Collective
Brands will be built on the foundation of each company's individual
core competencies and outstanding heritage. It will enjoy several
competitive advantages: -- The ability to target specific customer
segments with branded products offered at a range of price points
through the highly respected Payless and Stride Rite retail store
chains and a vibrant wholesale distribution channel. -- The
preeminent position in children's footwear both at the premium and
moderate level. -- A stronger, more efficient organization with the
scope and scale to manage all aspects of getting to market -- from
interpretations of emerging trends through design, development,
sourcing, logistics and distribution. Following completion of the
transaction, Matt Rubel, Payless' Chief Executive Officer and
President, will serve as CEO of Collective Brands, Inc. overseeing
the business units. Collective Brands, Inc. will remain listed on
The New York Stock Exchange and, along with Payless ShoeSource,
have its headquarters in Topeka, Kan.; Stride Rite's headquarters
will remain in Lexington, Mass.; and Collective Licensing will
continue to be headquartered in Denver, Colo. Each of the
individual operating units will retain their own names, identities
and discrete operations. "This transaction is squarely on strategy
and driven by its strong growth potential," said Mr. Rubel.
"Through this acquisition and as indicated by the change in our
name, we are creating a leading, innovative global footwear,
accessory and lifestyle brand company that is well positioned to
grow in both our key domestic and international markets. Together
we can provide the customers, employees and business partners of
all three business units with greater opportunities, and investors
with enhanced value." "We believe this is the right strategic
decision for Stride Rite's shareholders, customers, and employees,"
said David Chamberlain, Chairman and CEO of The Stride Rite
Corporation. "This transaction will create substantial value for
Stride Rite shareholders, provide significant supply chain
efficiencies and greater resources to grow our business as a
separate unit within the holding company structure, and open up new
opportunities for our talented employees as part of a larger and
more diversified organization." The outstanding Stride Rite and
Payless teams operate in distinct markets which will enable
Collective Brands to quickly capitalize on the most promising
growth opportunities in the footwear and accessories industry: --
Over the past five years, the branded footwear category has
experienced higher growth than private label or designer
categories. Collective Brands will offer more brands to more
customers. -- Children's footwear is among the fastest growing
footwear sectors. Through its distinct and complementary operating
units -- Payless and Stride Rite -- Collective Brands will have a
strong leadership position with about 19% unit share in this growth
segment. The support of Collective Brands and its ability to invest
and provide back-end efficiencies will enable Stride Rite to
develop innovative new products and accelerate growth of
well-located stores. -- Casual footwear is one of the faster
growing categories. Collective Brands will be in a strong position
to capitalize in both men's and women's as Keds, Sperry Top-Sider
and Tommy Hilfiger are all brands with cachet, authenticity and
substantial growth potential. -- Collective Brands can accelerate
the growth of the Saucony business on a global basis by providing
greater support for this leading technical running brand in the
premium performance footwear market. -- Off-mall retail locations
such as in lifestyle and outlet centers are increasingly preferred
by consumers. Stride Rite stores are currently under-penetrated in
these shopping venues and present a strong opportunity for growth
by leveraging Collective Brands' strong real estate expertise and
scale advantages. -- Finally, the new company will be better
positioned to compete in the global marketplace through expansion
across all of its business channels -- retailing, wholesaling,
licensing and e-commerce. The combined company is expected to have
strong pro-forma financials: -- The transaction is expected to be
earnings per share accretive in fiscal year 2008. -- The 2006 -
2009 compound annual growth rate in operating profit is expected to
be in excess of 20%. -- The debt leverage ratio for the new company
is expected to return to Payless' pre-transaction level within two
to three years of the acquisition's consummation. The core Payless
business unit should continue to achieve low single-digit positive
same-store sales on a consistent basis through successful execution
of its merchandising strategies. Over time, the Payless unit is
expected to contribute operating profit percentage growth in the
mid-teens. The transaction is subject to customary closing
conditions and regulatory approvals, as well as approval by Stride
Rite shareholders. The transaction is expected to close in the
third fiscal quarter of 2007. The intention to rename the company
to Collective Brands, Inc. is also subject to approval by Payless
ShoeSource shareholders. Citi and Financo, Inc. are the financial
advisors to Payless, and Sullivan & Cromwell is the company's
legal advisor. Goldman Sachs is the financial advisor to Stride
Rite and Goodwin, Procter is its legal advisor. Conference Call A
conference call for investors and other interested parties will be
held today at 5:00 pm eastern time. Questions will be taken only
from investors and analysts. The dial-in number for the call is
800-789-4818 or for international callers 706-902-0750. The
conference ID is 1405579. The call will also be available on the
Internet on the Investor Relations page at
http://www.paylessinfo.com/. The conference call replay will be
available at the same website or by dialing 1-800-642-1687 (+1
706-645-9291 international) beginning Thursday. Materials related
to the transaction are available on the new website,
http://www.collectivebrandsinc.com/. About Payless ShoeSource,
Stride Rite, and Forward Looking Statements Payless ShoeSource,
Inc., the largest specialty family footwear retailer in the Western
Hemisphere, is dedicated to democratizing fashion and design in
footwear and accessories and inspiring fun, fashion possibilities
for the family at a great value. As of the end of the fourth
quarter 2006, the company operated a total of 4,572 stores. In
addition to its stores, customers can buy shoes over the Internet
at http://www.payless.com/. The Stride Rite Corporation markets the
leading brand of high quality children's shoes in the United
States. Other footwear products for children and adults are
marketed by the Company under well-known brand names, including
Keds, Sperry Top-Sider, Tommy Hilfiger Footwear, Saucony,
Grasshoppers, Robeez, Munchkin, Spot-bilt. Apparel products are
marketed by the Company under the Saucony and Hind brand names.
Information about the Company is available on its website --
http://www.strideritecorp.com/. Information about the Company's
brands and product lines is available at
http://www.striderite.com/, http://www.keds.com/,
http://www.sperrytopsider.com/, http://www.grasshoppers.com/,
http://www.saucony.com/ and http://www.hind.com/. This release
contains one or more forward-looking statements. Forward-looking
statements are identified by words such as "will," "expected," and
other similar words. A variety of known and unknown risks and
uncertainties could cause actual results to differ materially from
the anticipated results which include, but are not limited to:
satisfaction of all conditions required for closing, the ability to
obtain the approval of Stride Rite Corporation's shareholders; the
risk that the businesses will not be integrated successfully, or
will take longer than anticipated; the risk that the expected cost
savings will not be achieved or unexpected costs will be incurred;
the risk that customers will not be retained or that disruptions
from the transaction will harm relationships with customers,
employees and suppliers; costs and other expenditures in excess of
those projected for environmental investigation and remediation or
other legal proceedings; changes in accounting treatment of any
financings; changes in consumer spending patterns; changes in
intellectual property, customs and/or tax laws; litigation,
including intellectual property and employment litigation; and the
ability to hire and retain associates. In addition, other risks and
uncertainties not presently known to us or that we consider
immaterial could affect the accuracy of our forward-looking
statements. Please refer to the Companies' 2006 Annual Reports on
Form 10-K for the fiscal year ended 2006 for more information on
these and other risk factors that could cause actual results to
differ. The Companies do not undertake any obligation to release
publicly any revisions to such forward-looking statements to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. This communication may be
deemed to be solicitation material in respect of the proposed
acquisition of Stride Rite by Payless. In connection with the
proposed acquisition, Payless and Stride Rite intend to file
relevant materials with the SEC, including Stride Rite's proxy
statement on Schedule 14A. SHAREHOLDERS OF STRIDE RITE ARE URGED TO
READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING STRIDE
RITE'S PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders will be able to obtain the documents free of charge at the
SEC's web site, http://www.sec.gov/, and Stride Rite shareholders
will receive information at an appropriate time on how to obtain
transaction-related documents for free from Stride Rite. Such
documents are not currently available. This communication may also
be deemed to be solicitation material in respect of the proposed
amendment to the certificate of incorporation of Payless. In
connection with the amendment to the certificate of incorporation,
Payless intends to file relevant materials with the SEC, including
Payless' proxy statement on Schedule 14A. SHAREHOLDERS OF PAYLESS
ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING PAYLESS' PROXY STATEMENT, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED AMENDMENT TO PAYLESS'
CERTIFICATE OF INCORPORATION. Investors and security holders will
be able to obtain the documents free of charge at the SEC's web
site, http://www.sec.gov/, and Payless shareholders will receive
information at an appropriate time on how to obtain documents
related to the amendment of the certificate of incorporation for
free from Payless. Such documents are not currently available.
Payless and its directors and executive officers, and Stride Rite
and its directors and executive officers, may be deemed to be
participants in the solicitation of proxies from the holders of
Stride Rite common stock in respect of the proposed transaction.
Payless and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from the holders of
Payless common stock in respect of the proposed amendment of
Payless' Certificate of Incorporation. Information about the
directors and executive officers of Payless is set forth in
Payless' Annual Report on Form 10-K for the most recently ended
fiscal year, which was filed with the SEC on April 3, 2007.
Information about the directors and executive officers of Stride
Rite is set forth in the proxy statement for Stride Rite's most
recent 10-K, which was filed with the SEC on February 13, 2007.
Investors may obtain additional information regarding the interest
of Payless and its directors and executive officers, and Stride
Rite and its directors and executive officers in the proposed
transaction by reading the proxy statement regarding the
acquisition when it becomes available. Investors may obtain
additional information regarding the interest of Payless and its
directors and executive officers in the proposed amendment to
Payless' Certificate of Incorporation by reading the proxy
statement regarding the amendment of the certificate of
incorporation when it becomes available. DATASOURCE: Payless
ShoeSource, Inc. CONTACT: investors, James Grant of Payless
ShoeSource, Inc., +1-785-559-5321, ; or media, Mardi Larson,
+1-612-928-0202, , for Payless ShoeSource, Inc.; or Frank A.
Caruso, Chief Financial Officer of The Stride Rite Corporation,
+1-617-824-6611, ; or Renee Soto of Sard Verbinnen & Co.,
+1-212-687-8080, , for The Stride Rite Corporation Web site:
http://www.paylessinfo.com/ Company News On-Call:
http://www.prnewswire.com/comp/136152.html
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