The company known for its lightweight shoes just got a heavy-duty investment from a leading investment firm: Crocs announced late Sunday night that it has entered into a partnership with Blackstone, who will purchase $200 million of Crocs convertible preferred stock. As a result of this investment, Crocs stock is surging in early market activity Monday morning.
In conjunction with the Blackstone investment, Crocs said it will revise its capital structure to allow a $350 million stock repurchase program, which CFO Jeff Lasher said should begin in the first quarter of 2014.
“We will add $200 million of long-term non-publicly traded preferred equity and the stock repurchase program, when completed, will reduce our publicly traded common stock float by approximately 30% (at today’s market price), while maintaining a strong net cash position on our balance sheet,” Lasher said in a statement. “We expect these initiatives to reduce volatility in both our common stock price and our shareholder base and provide a strong foundation to unlock long-term value for our shareholders.”
The preferred stock purchased by Blackstone, which represents a 13% stake in Crocs, will have a 6% cash dividend rate and is convertible into shares of common stock at a conversion price of $14.50 per share. According to Crocs, this conversion price represents a 9% premium to the closing price of $13.33 per share on December 27, 2013, and a 10% premium to the 30-day average closing price of $13.19 per share. The $200 million investment is also providing Blackstone with two seats on Crocs’ board of directors.
Prakash Melwani, senior managing director and chief investment officer of Blackstone’s private equity group said in a statement, “Blackstone sees tremendous opportunity in the Crocs brand and global franchise. The company has the infrastructure and products to enable continued growth across the wide range of geographies and channels through which it operates,” he said. “We believe our consumer and retail investing experience coupled with the network of value-added resources within Blackstone will make us a strong partner for Crocs.”
Alongside the announcement of the Blackstone investment, Crocs also announced that president and CEO John McCarvel will retire on April 30, 2014. ”It has been an honor to be part of the Crocs global team for the past decade and to lead it since 2010,” McCarvel said in a statement, adding that the company has made tremendous progress over the past 10 years, highlighting its evolution from a one-shoe brand that is now much more diversified.
“John’s contributions to this company are immeasurable,” said Thomas Smach, Crocs chairman of the board. “As our CEO, he led a turnaround of Crocs and established it as a profitable, diversified company with more than $1 billion in annual revenue, strong cash flows, and a robust balance sheet with more than$300 million in net cash.”
Finally, Crocs also affirmed the lower end of its fourth quarter guidance, saying that it expects revenue of $220 million and a loss of 23 cents per share. Costs associated with the Blackstone agreement did not factor into this guidance.
Following news of Blackstone’s investment, shares of Crocs surged in pre-market activity Monday morning, and were up nearly 13% as the opening bell approached. Year-to-date, shares of the shoemaker are down 9.9%. Blackstone was flat in Monday morning pre-market trading; year-to-date, the investment group has seen a whopping 93.6% gain.
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