Deckers Outdoor Corporations offered top dollar last week to buy Sanuk, one of the few lifestyle brands out there capable of duplicating the success of the Ugg Australia brand.

DECK offered $120 million in cash-about a quarter of its cash reserves – plus earn out payments that could increase the final price for Sanuk to as much as $150 million, or tens times EBIDTA by year end.  Sanuk had sales of $43 million in 2010 and is expected to double sales this year and generate $15 million in EBIDTA.

The agreement calls for DECK to acquire certain assets and liabilities of Sanuk U.S.A. LLC and of C. & C. Partners, LTD., the exclusive licensee for the Sanuk brand in the United States, Europe and Canada. C & C handles sourcing, distribution and other operations for the brand under a license from Sanuk U.S.A., which is controlled by Sanuk founder and creative guy Jeff Kelley. The two companies began shopping the business through a high competitive process last year.

If completed, DECK expects the acquisition to be modestly accretive to earnings for 2011, excluding one-time transaction costs. Sanuks existing senior management will continue to run the operation from its Irvine headquarters and distribution center until further notice. Deckers headquarters are located nearly three hours north in Goleta, CA.

DECK has had mixed results with its acquisitions. Teva, which it acquired in 2002, contributed about 11 percent of sales. Its other three brands – Simple Shoes, Tsubo and Ahnu-contributed just 3 percent of sales and are not growing at nearly the rate of Sanuk. Ugg Australia. however, has been a rare runaway hit. The brand, acquired by DECK in 2005, generated 87% of DECKs $1.0 billion in 2010 sales and is on pace to become a $1 billion brand by 2015.

Sanuk may have more potential to become the next Ugg than any of the brands in DECKs existing portfolio.

They have much in common with Ugg, in terms of both well-nurtured brand equity, early growth trajectory and international distribution potential, said Tripp Baird, founding principal and director with Partnership Capital Growth, a San Francisco investment advisory firm that recently advised The Combs Company on its sale to Weyco Group (SEW_1110). Sanuk undoubtedly has the potential to become a similar platform and should be a meaningful driver of top-line growth for the company. Brands like that dont come around all that often.”

Deckers President, CEO and Chairman Angel Martinez called Sanuk an ideal acquisition candidate.

“It’s a profitable, well-run business with a corporate culture similar to ours, and provides substantial growth opportunities, particularly within the action sports market where it has a large and loyal customer base of active outdoor enthusiasts, said Martinez. Its authentic product collections complement our existing portfolio with minimal overlap, and it’s a brand that we believe has true global lifestyle potential.”

Sanuk (which means “fun” in Thai) was founded in 1997 by Jeff Kelley, whose first product was a sandal made of green indoor-outdoor carpet. Today, the company offers sandals and shoes for men, women and children, but remains best known for its patented Sidewalk Surfer Shoe, which effectively introduced the deconstructed footwear movement. Sanuk products are now available in more than 1,700 retailers in 40 countries and at

Martinez, who is a big believer in restricting distribution to create value for retailers, said he is impressed by how Sanuk has transcended its origins in surf and action sports and crossed over into outdoor retailers such as REI, EMS and Bass Pro, specialty retailers Fred Segal and Nordstrom and large chains including Journeys, Dillards and The Buckle.

Kelley said he looks forward to accessing DECKs operational expertise and global infrastructure. That undoubtedly includes DECKs experience building UGG from a winter fashion boot into a nearly $1 billion all-season footwear line.

The deal, which is contingent on an audit of Sanuks financial statements and standard regulatory approvals, is expected to close in the third quarter.