Wolverine Worldwide has confirmed today that it will complete the previously announced acquisition of Collective Brands' Performance + Lifestyle Group (“PLG”), which consists of the Sperry Top-Sider®, Saucony®, Stride Rite® and Keds® brands, for a total purchase price of approximately $1.24 billion. Adding these exciting brands to an existing portfolio that is led by Merrell, Hush Puppies, Wolverine, Sebago and Caterpillar Footwear creates an even more powerful collection of lifestyle brands that positions the company for accelerated growth in both revenue and profits.
With more than $1.0 billion of revenue and almost 40 million pairs shipped in its fiscal 2011, PLG will become the company's largest operating group, joining the company's existing Outdoor Group (Merrell, Chaco and Patagonia Footwear), Heritage Group (Wolverine, CAT Footwear, Harley-Davidson Footwear, Bates and HyTest) and Lifestyle Group (Hush Puppies, Sebago, Cushe and Soft Style). PLG will remain headquartered in Lexington, Massachusetts.
“Today marks a transformational event for our company,” said Blake W. Krueger, Wolverine Worldwide Chairman and CEO. “We couldn't be more excited about the tremendous growth potential that these four well-established and iconic brands bring to our proven global platform. Our new 16-brand portfolio well-diversified across product categories and consumer segments contains some of the worlds best-loved and most highly recognized brands, all of which are strongly positioned for domestic and international growth. The PLG team, under the leadership of Gregg Ribatt, has done an exceptional job of building a world-class organization, and we are incredibly pleased to welcome more than 3,800 PLG associates to the Wolverine Worldwide team.”
“PLG is on track for yet another year of record financial results,” continued Krueger. “PLG is expected to deliver excellent double-digit revenue growth and even stronger double-digit growth in operating income this full fiscal year, led by continued outstanding performance from Sperry Top-Sider and the resurgence in the Stride Rite Children's Group. We continue to be extremely excited about the opportunity to accelerate the growth of the PLG brands, particularly outside the United States, as we leverage both our international infrastructure and the talent across both organizations. Although we expect earnings dilution in the stub 2012 period due primarily to the later-than-anticipated transaction closing date and the seasonality of the PLG business the positive momentum of the PLG portfolio and our expectations for incremental net synergies have led us to raise our accretion estimates for fiscal years 2013 and 2014.”
Don Grimes, Wolverine Worldwide Senior Vice President and Chief Financial Officer, stated, “We are very pleased to close the transaction with a financing structure that we believe will serve the company well for years to come. On August 1 we announced the execution of a senior secured credit agreement that provides $1.1 billion of the financing at very attractive rates consisting of a $550 million Term Loan A, a $350 million Term Loan B and an undrawn $200 million revolving credit facility. Since that time, we've taken advantage of favorable market conditions to reprice the Term Loan B, reducing the interest rate by 75 basis points and the annual interest expense by $2.6 million. Additionally, as we announced on September 27, we successfully marketed the offering of $375 million of our 6.125% eight-year notes. Taken as a whole, our financing package, before the impact of interest rate swaps, has a weighted average cost of approximately 4.0% per year.”
The company is projecting earnings dilution in the range of 25 cents to 30 cents per share for the stub period through the end of its fiscal 2012, earnings accretion in fiscal 2013 in the range of $0.35 to $0.50 and earnings accretion in fiscal 2014 in the range of $0.60 to $0.80. These estimates include the expected incremental contribution from the PLG brands, expected net SG&A synergies, interest expense, amortization related to purchase price accounting and amortization of capitalized debt fees. The estimates do not include non-recurring transaction-related expenses (other than the amortization of capitalized debt fees), non-recurring integration costs and revenue synergies resulting from the company's expanded portfolio of brands.
Krueger concluded, “The closing of the PLG acquisition today is the most significant milestone in our company's history, and I'd like to sincerely thank our many associates, in Michigan, Massachusetts and around the world, who have worked so hard to make it a reality. Now the fun part begins taking the new portfolio of brands to even greater heights around the world. I look forward to reporting on our successful journey for many years to come.”
