The share prices of Crocs Inc. dropped the most after more than a year when the company agreed to buy out Heyduke, the casual shoe brand company. The $2.5 billion transactions are an effort to strengthen the fast-growing everyday footwear business.
As per Bloomberg news, this deal is funded by $450 million Crocs shares and $2.05 billion in cash, which will be paid to Alessandro Rosana, the founder of Heydude. Crocs said that it expects the deal to add to its sales earnings and growth immediately in a statement Thursday. The combined business operations are expected to generate significant cash flows.
The once derided foam clogs are now a new craze among the hip Generation Z crowd. The deal is expected to help expand the business rapidly for Crocs, and the company expects growth of at least 65% this year. Heydude will operate as a standalone division making casual lightweight shoes and sandals for children, women, and men.
The share prices of Crocs fell by almost 11% on Thursday. It dropped to $124.50 at 9.50 a.m. New York after an intraday slide of 12%. The fall has been the most since April 2020. The stock had doubled in 2021 till Wednesday’s close.
Heydude’s acquisition is expected to be complete in the first quarter of 2022. To fund the cash component, Crocs is taking a B facility type $2 billion term loan and borrowing another $50 million under its existing revolving credit facility.
The company has been placed under a BB- rating by Standard & Poor. This rating has a negative implication is under credit watch.
The financial advisor to Crocs is Citi, while Bird & Bird and Perkins Coie LLP are the legal advisors. Sullivan & Cromwell, Croon Law Group LLC, Chiomenti, Cozen O’Connor, and Deacons serve as legal counsel to Heydude. The financial advisor to Heydude is LVC Asia Pacific Ltd.
