Rocky Brands, Inc. announced that it has entered into a definitive agreement to acquire the performance and lifestyle footwear business of Honeywell International, Inc. including The Original Muck Boot Company and Xtratuf footwear brands, for a purchase price of $230 million.
Jason Brooks, president and chief executive officer of Rocky Brands, Inc., commented, “With the acquisition of The Original Muck Boot Company along with the Xtratuf, Servus, NEOS and Ranger brands, we will greatly enhance our powerful portfolio of footwear brands and significantly increase our sales and profitability. We’re acquiring a well-run business with corporate culture and a customer base similar to ours, which provides meaningful growth opportunities within our existing categories as well as an entrée into new market segments. Its innovative and authentic product collections complement our existing offering with minimal overlap, which will allow us to strengthen our wholesale relationships and serve a wider consumer audience. At the same time, we plan to leverage Rocky’s advanced fulfillment capabilities to improve the distribution of the new brands to wholesale customers and accelerate direct-to-consumer penetration. I am incredibly proud of the success our organization has achieved over the past several years, and I am excited to build on our momentum as we begin this exciting new chapter for the company.”
“We are thrilled to be joining Rocky Brands,” said Craig Reingold, president of Honeywell’s lifestyle footwear business. “This transaction will bring together many strong, beloved brands. As we look to the future, the combined entities provide our passionate associates with greater opportunities to serve our accounts and consumers who have come to love our brands. I could not be more proud of the team and their success in building our brands over the past several years. We look forward to a smooth integration and capitalizing on our collective experience, innovation and operational expertise to deliver outsized growth for years to come.”
Lifestyle and Performance Business Overview
The acquired brand portfolio has built strong consumer loyalty. For 2020, net revenue is estimated to be approximately $205 million with an EBITDA of approximately $24.5 million. The business grew in 2020 with performance accelerating through the year, culminating in strong top-line growth in the fourth quarter.
The Original Muck Boot Company pioneered the rubber and neoprene boot category. Xtratuf, an outfitter in the commercial fishing segment, has provided Alaskan fishermen with footwear for wet conditions for nearly 60 years. Servus boots date back to the 1920s, and today the brand is known for its PVC footwear made for wet working conditions. NEOS is known for its overshoes with traction for extreme conditions. Ranger boots are made for cold, wet weather and offer function at a value price.
Inducement Grants Under Nasdaq Listing Rule 5635(c)(4)
In connection with the signing of the purchase agreement, seven management employees of Honeywell’s lifestyle footwear business located in Westwood, MA have entered into employment agreements with Rocky Brands, conditioned on the closing of the transaction. As an inducement to enter into the employment agreements, Rocky Brands agreed to grant stock options to the seven management employees, totaling options to purchase 25,000 shares, on the date of closing of the transaction. The options have a term of 10 years from the date of grant and vest 50 percent on the first anniversary of the date of grant with the remaining 50 percent vesting on the second anniversary of the date of grant. The options were granted as inducements to employment in accordance with Nasdaq Listing Rule 5635(c)(4).
The purchase price is being funded with an $80-million senior secured asset-backed credit facility with Bank of America, N.A., a $130 million senior secured term loan facility with The Direct Lending Group of TCW Asset Management Company LLC, and cash on hand. The credit facility bears interest at LIBOR plus 1.50 percent and the term loan bears interest at LIBOR plus 7.00 percent. Terms of the credit facility and term loan will be more completely discussed in the Company’s Form 8-K filed with the Securities and Exchange Commission
Transaction Approval and Closing
The definitive purchase agreement, subject to customary closing conditions and regulatory approvals, was approved unanimously by the Rocky Brands Board of Directors and is expected to close in the first quarter of 2021.
B. Riley Securities served as financial advisor to Rocky Brands, Inc. and provided its Board of Directors with a fairness opinion. Porter Wright Morris & Arthur LLP served as legal counsel to Rocky Brands, Inc. Centerview Partners served as the financial advisor to Honeywell, and Crowell & Moring LLP served as legal counsel.
In a separate statement, John Waldron, president and CEO, Honeywell Safety and Productivity Solutions, said, “These are well-respected brands beloved by professionals and outdoor enthusiasts for work and play, and we’re proud of our team that has grown this business in recent years. We’re excited for them to join Rocky Brands, who will continue to accelerate growth by leveraging its significant industry knowledge and expertise.”
Honeywell will continue to manufacture industrial safety footwear for workers under brands such as Oliver, MTS, Honeywell Bacou and others.
Photo courtesy The Original Muck Boot Company