Footwear brand Crocs, Inc. (Nasdaq: CROX) will acquire Italian casual footwear brand Hey Dude for $2.5 billion, in a move said to expand the company’s global presence and diversify its offerings, taking advantage of the growing demand for casual footwear.
The deal, announced December 23, consists of $2.05 billion in cash and 2,852,280 shares of Crocs stock valued at $450 million. According to the filing, Crocs anticipates entering into a $2 billion Term Loan B Facility and borrowing $50 million under its existing Senior Revolving Credit Facility to fund the cash portion of the deal. The indemnity cap for the deal is $125 million or 5% of the transaction value. The deal is expected to be immediately accretive to Crocs’ revenue, margins and earnings. Specifically, Hey Dude had about $570 million in 2021 estimated revenue. Crocs expected about “$700 – $750 million of PF 2022 revenue,” as noted in documents.
According to an investor presentation, the acquisition of Hey Dude is strategic as it helps to create a “global, scaled leader in branded casual footwear” and “combines two fast-growing footwear brands and more than quadruples total addressable market to more than $160 billion.” This will also diversify Crocs’ portfolio and align with Crocs’ vision and long-term consumer trends. Furthermore, Crocs added that it will utilize its high digital penetration and rely on its global footprint, marketing and wholesale relations. Crocs noted that it anticipates by 2024 to build Hey Dude to become a $1 billion brand.
Pursuant to the deal, upon closing Hey Dude “will operate as a standalone division” and its founder, Alessandro Rosano, will “lead innovative product development as Strategic Advisor and Creative Director.”
“With the acquisition of Hey Dude, we are thrilled to add another high-growth, highly profitable brand to our portfolio,” Andrew Rees, CEO of Crocs, said in a press release. “We believe Hey Dude’s casual, comfortable and lightweight products are aligned to long-term consumer trends and are a perfect fit for Crocs. We intend to leverage our global presence, best-in-class marketing and scale infrastructure to build upon Hey Dude’s strong foundation and create significant shareholder value.”
Hey Dude is represented by Chiomenti Studio Legale, Deacons, Cozen O’Connor, Sullivan & Cromwell as well as Croon Law Group LLC and its financial advisor is LVC Asia Pacific Ltd. Crocs is represented by Perkins Coie LLP and Bird & Bird and its financial advisor is Citi.
The deal is subject to customary closing conditions and regulatory approval. It is expected to close in Q1 2022.
Prior to the announcement, on December 22, Crocs’ stock was valued at $139.78. After it was announced on December 23, the stock was valued at $123.53, a decrease of approximately 10%. As of January 6, stock rebounded somewhat to $128.68.