New Company, to be Named Collective Brands, Inc., will Bring Together
Differentiated Brands, Complementary Businesses and Strengths to Accelerate
Retail, Wholesale and Licensing Growth
Global Lifestyle Branded Footwear Focused On Growth Opportunities; Expands
Consumer Reach Across Multiple Price Points and Channels
TOPEKA, Kan. and LEXINGTON, Mass., May 22 /PRNewswire-FirstCall/ --
Payless ShoeSource, Inc. (NYSE: PSS) and The Stride Rite Corporation (NYSE:
SRR) announced today the signing of a definitive agreement by which Payless
will acquire Stride Rite, which owns or licenses such key upscale brands as
Stride Rite(R), Keds(R), Sperry Top-Sider(R), Tommy Hilfiger Footwear(R),
Saucony(R) and Robeez(R), for approximately $800 million plus the
assumption of Stride Rite debt. The all-cash offer of $20.50 per share
represents a 32% premium over Stride Rite's average stock price over the
past 90 days and was approved unanimously by the boards of directors of
both companies.
Concurrent with the closing of the transaction, Payless ShoeSource
intends to rename the company Collective Brands, Inc. and, as a holding
company, will operate three standalone business units.
Collective Brands is expected to have stronger growth potential than
either Payless or Stride Rite alone as a result of a strong portfolio of
well-known footwear, lifestyle and athletic brands and competitive
advantages stemming from increased scope and scale.
The new Collective Brands holding company will operate a powerful
business model with leading retail, wholesale, licensing and e-commerce
channels. The three highly complementary and separate business units have
distinct missions in terms of their product offering, distribution
channels, and target customer base:
-- Payless stores, focusing on democratizing fashion and design in
footwear and accessories through its nearly 4,600 store retail chain;
-- Stride Rite, centering on lifestyle and athletic branded footwear and
high-quality children's footwear sold primarily through wholesaling
arrangements and more than 300 Stride Rite store locations; and,
-- Collective Licensing International, specializing in brand management
and global licensing of its expanding portfolio of youth, lifestyle and
high-quality fashion athletic brands.
Terms of the Transaction
Under the terms of the transaction, Payless ShoeSource would acquire
all of the outstanding shares of Stride Rite for approximately $800 million
plus assumed debt. The acquisition will be financed through existing cash
resources and committed new financings.
Collective Brands will be built on the foundation of each company's
individual core competencies and outstanding heritage. It will enjoy
several competitive advantages:
-- The ability to target specific customer segments with branded products
offered at a range of price points through the highly respected Payless
and Stride Rite retail store chains and a vibrant wholesale
distribution channel.
-- The preeminent position in children's footwear both at the premium and
moderate level.
-- A stronger, more efficient organization with the scope and scale to
manage all aspects of getting to market -- from interpretations of
emerging trends through design, development, sourcing, logistics and
distribution.
Following completion of the transaction, Matt Rubel, Payless' Chief
Executive Officer and President, will serve as CEO of Collective Brands,
Inc. overseeing the business units. Collective Brands, Inc. will remain
listed on The New York Stock Exchange and, along with Payless ShoeSource,
have its headquarters in Topeka, Kan.; Stride Rite's headquarters will
remain in Lexington, Mass.; and Collective Licensing will continue to be
headquartered in Denver, Colo. Each of the individual operating units will
retain their own names, identities and discrete operations.
"This transaction is squarely on strategy and driven by its strong
growth potential," said Mr. Rubel. "Through this acquisition and as
indicated by the change in our name, we are creating a leading, innovative
global footwear, accessory and lifestyle brand company that is well
positioned to grow in both our key domestic and international markets.
Together we can provide the customers, employees and business partners of
all three business units with greater opportunities, and investors with
enhanced value."
"We believe this is the right strategic decision for Stride Rite's
shareholders, customers, and employees," said David Chamberlain, Chairman
and CEO of The Stride Rite Corporation. "This transaction will create
substantial value for Stride Rite shareholders, provide significant supply
chain efficiencies and greater resources to grow our business as a separate
unit within the holding company structure, and open up new opportunities
for our talented employees as part of a larger and more diversified
organization."
The outstanding Stride Rite and Payless teams operate in distinct
markets which will enable Collective Brands to quickly capitalize on the
most promising growth opportunities in the footwear and accessories
industry:
-- Over the past five years, the branded footwear category has experienced
higher growth than private label or designer categories. Collective
Brands will offer more brands to more customers.
-- Children's footwear is among the fastest growing footwear sectors.
Through its distinct and complementary operating units -- Payless and
Stride Rite -- Collective Brands will have a strong leadership position
with about 19% unit share in this growth segment. The support of
Collective Brands and its ability to invest and provide back-end
efficiencies will enable Stride Rite to develop innovative new products
and accelerate growth of well-located stores.
-- Casual footwear is one of the faster growing categories. Collective
Brands will be in a strong position to capitalize in both men's and
women's as Keds, Sperry Top-Sider and Tommy Hilfiger are all brands
with cachet, authenticity and substantial growth potential.
-- Collective Brands can accelerate the growth of the Saucony business on
a global basis by providing greater support for this leading technical
running brand in the premium performance footwear market.
-- Off-mall retail locations such as in lifestyle and outlet centers are
increasingly preferred by consumers. Stride Rite stores are currently
under-penetrated in these shopping venues and present a strong
opportunity for growth by leveraging Collective Brands' strong real
estate expertise and scale advantages.
-- Finally, the new company will be better positioned to compete in the
global marketplace through expansion across all of its business
channels -- retailing, wholesaling, licensing and e-commerce.
The combined company is expected to have strong pro-forma financials:
-- The transaction is expected to be earnings per share accretive in
fiscal year 2008.
-- The 2006 - 2009 compound annual growth rate in operating profit is
expected to be in excess of 20%.
-- The debt leverage ratio for the new company is expected to return to
Payless' pre-transaction level within two to three years of the
acquisition's consummation.
The core Payless business unit should continue to achieve low
single-digit positive same-store sales on a consistent basis through
successful execution of its merchandising strategies. Over time, the
Payless unit is expected to contribute operating profit percentage growth
in the mid-teens.
The transaction is subject to customary closing conditions and
regulatory approvals, as well as approval by Stride Rite shareholders. The
transaction is expected to close in the third fiscal quarter of 2007. The
intention to rename the company to Collective Brands, Inc. is also subject
to approval by Payless ShoeSource shareholders.
Citi and Financo, Inc. are the financial advisors to Payless, and
Sullivan & Cromwell is the company's legal advisor. Goldman Sachs is the
financial advisor to Stride Rite and Goodwin, Procter is its legal advisor.
Conference Call
A conference call for investors and other interested parties will be
held today at 5:00 pm eastern time. Questions will be taken only from
investors and analysts. The dial-in number for the call is 800-789-4818 or
for international callers 706-902-0750. The conference ID is 1405579. The
call will also be available on the Internet on the Investor Relations page
at http://www.paylessinfo.com. The conference call replay will be available
at the same website or by dialing 1-800-642-1687 (+1 706-645-9291
international) beginning Thursday.
Materials related to the transaction are available on the new website,
http://www.collectivebrandsinc.com.
About Payless ShoeSource, Stride Rite, and Forward Looking Statements
Payless ShoeSource, Inc., the largest specialty family footwear
retailer in the Western Hemisphere, is dedicated to democratizing fashion
and design in footwear and accessories and inspiring fun, fashion
possibilities for the family at a great value. As of the end of the fourth
quarter 2006, the company operated a total of 4,572 stores. In addition to
its stores, customers can buy shoes over the Internet at
http://www.payless.com.
The Stride Rite Corporation markets the leading brand of high quality
children's shoes in the United States. Other footwear products for children
and adults are marketed by the Company under well-known brand names,
including Keds, Sperry Top-Sider, Tommy Hilfiger Footwear, Saucony,
Grasshoppers, Robeez, Munchkin, Spot-bilt. Apparel products are marketed by
the Company under the Saucony and Hind brand names. Information about the
Company is available on its website -- http://www.strideritecorp.com.
Information about the Company's brands and product lines is available at
http://www.striderite.com, http://www.keds.com,
http://www.sperrytopsider.com, http://www.grasshoppers.com,
http://www.saucony.com and http://www.hind.com.
This release contains one or more forward-looking statements.
Forward-looking statements are identified by words such as "will,"
"expected," and other similar words. A variety of known and unknown risks
and uncertainties could cause actual results to differ materially from the
anticipated results which include, but are not limited to: satisfaction of
all conditions required for closing, the ability to obtain the approval of
Stride Rite Corporation's shareholders; the risk that the businesses will
not be integrated successfully, or will take longer than anticipated; the
risk that the expected cost savings will not be achieved or unexpected
costs will be incurred; the risk that customers will not be retained or
that disruptions from the transaction will harm relationships with
customers, employees and suppliers; costs and other expenditures in excess
of those projected for environmental investigation and remediation or other
legal proceedings; changes in accounting treatment of any financings;
changes in consumer spending patterns; changes in intellectual property,
customs and/or tax laws; litigation, including intellectual property and
employment litigation; and the ability to hire and retain associates. In
addition, other risks and uncertainties not presently known to us or that
we consider immaterial could affect the accuracy of our forward-looking
statements. Please refer to the Companies' 2006 Annual Reports on Form 10-K
for the fiscal year ended 2006 for more information on these and other risk
factors that could cause actual results to differ. The Companies do not
undertake any obligation to release publicly any revisions to such
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
This communication may be deemed to be solicitation material in respect
of the proposed acquisition of Stride Rite by Payless. In connection with
the proposed acquisition, Payless and Stride Rite intend to file relevant
materials with the SEC, including Stride Rite's proxy statement on Schedule
14A. SHAREHOLDERS OF STRIDE RITE ARE URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING STRIDE RITE'S PROXY STATEMENT, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain the documents free of
charge at the SEC's web site, http://www.sec.gov, and Stride Rite
shareholders will receive information at an appropriate time on how to
obtain transaction-related documents for free from Stride Rite. Such
documents are not currently available.
This communication may also be deemed to be solicitation material in
respect of the proposed amendment to the certificate of incorporation of
Payless. In connection with the amendment to the certificate of
incorporation, Payless intends to file relevant materials with the SEC,
including Payless' proxy statement on Schedule 14A. SHAREHOLDERS OF PAYLESS
ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING
PAYLESS' PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED AMENDMENT TO PAYLESS' CERTIFICATE OF INCORPORATION.
Investors and security holders will be able to obtain the documents free of
charge at the SEC's web site, http://www.sec.gov, and Payless shareholders
will receive information at an appropriate time on how to obtain documents
related to the amendment of the certificate of incorporation for free from
Payless. Such documents are not currently available.
Payless and its directors and executive officers, and Stride Rite and
its directors and executive officers, may be deemed to be participants in
the solicitation of proxies from the holders of Stride Rite common stock in
respect of the proposed transaction. Payless and its directors and
executive officers may be deemed to be participants in the solicitation of
proxies from the holders of Payless common stock in respect of the proposed
amendment of Payless' Certificate of Incorporation. Information about the
directors and executive officers of Payless is set forth in Payless' Annual
Report on Form 10-K for the most recently ended fiscal year, which was
filed with the SEC on April 3, 2007. Information about the directors and
executive officers of Stride Rite is set forth in the proxy statement for
Stride Rite's most recent 10-K, which was filed with the SEC on February
13, 2007. Investors may obtain additional information regarding the
interest of Payless and its directors and executive officers, and Stride
Rite and its directors and executive officers in the proposed transaction
by reading the proxy statement regarding the acquisition when it becomes
available. Investors may obtain additional information regarding the
interest of Payless and its directors and executive officers in the
proposed amendment to Payless' Certificate of Incorporation by reading the
proxy statement regarding the amendment of the certificate of incorporation
when it becomes available.
SOURCE Payless ShoeSource, Inc.
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Related links:
http://www.paylessinfo.com
http://www.prnewswire.com/comp/136152.html/
CONTACT:
investors, James Grant of Payless ShoeSource,
Inc., +1-785-559-5321, james_grant@payless.com; or media, Mardi
Larson, +1-612-928-0202, mardi@mardilarson.com, for Payless
ShoeSource, Inc.; or Frank A. Caruso, Chief Financial Officer of
The Stride Rite Corporation, +1-617-824-6611,
frank_caruso@striderite.com; or Renee Soto of Sard Verbinnen &
Co., +1-212-687-8080, rsoto@sardverb.com, for The Stride Rite
Corporation
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