Payless ShoeSource plans to acquire privately held Collective International, LP, Denver, a brand development, management and licensing company with a brand portfolio including Airwalk, Vision Street Wear, Lamar, Sims, LTD, genetic, Dukes, Rage, Ultra-Wheels, and Skate Attack.

“The acquisition of Collective is another significant step in our strategy to position Payless as a vertically integrated, House of Brands retailer offering well-recognized brands combined with on-trend, high-quality footwear and accessories at a great price,” said Matthew E. Rubel, Chief Executive Officer and President of Payless. “Collective owns some of the most popular youth lifestyle brands in the U.S. Through this acquisition, we have an opportunity to expand Airwalk, an important brand for Payless, secure access to great brand management talent and expertise, as well as establish a platform to enter the brand development, management and licensing business.”

The acquisition provides immediate brand leverage for Payless' core footwear and accessories product lines in the youth lifestyle, athletics and outdoor categories. It also facilitates building broad corporate intellectual property management and brand development capabilities to create a diversified portfolio of brands serving discrete consumer segments across a range of price points, categories, and sales channels. As well, with this acquisition, Payless is establishing a licensing business that will provide growth opportunities across multiple product categories in domestic and international markets to create new revenue streams from wholesaling or licensing to other retailers and third parties.

Payless plans to operate Collective as a Denver-based wholly-owned subsidiary headed by Collective's President and CEO Bruce Pettet and staffed by Collective's talented design and licensing team.

“This acquisition provides Collective with a tremendous parent company that will accelerate our ability to become the leader in youth lifestyle and fashion athletic brand licensing,” Mr. Pettet said.

Payless has been a licensee of the Airwalk brand since 2003 and features the brand on a wide range of footwear and accessories. Payless has helped drive Airwalk to be the number two skate footwear brand in America.

Today, Payless' House of Brands product offering includes athletic and athletic-inspired brands including Champion®, Spalding®, Shaquille O'Neal- endorsed Dunkman(TM), Airwalk, and Tailwind®, a unique new performance technology-meets-fashion women's footwear brand supplied by Exeter Brands Group, a wholly owned subsidiary of NIKE, Inc., as well as the youth fashion brand American Eagle®, acquired in 2006.

The purchase price is expected to be approximately $91 million, subject to customary purchase price adjustments to reflect the current assets and total liabilities at closing. The transaction is anticipated to close in the first half of Payless' fiscal 2007. Payless believes the proposed transaction will be neutral to its fiscal 2007 net earnings and will be accretive to its fiscal 2008 net earnings.