Crocs Inc. (CROX:US) rose the most in more than four years after saying Chief Executive Officer John McCarvel will retire and Blackstone Group LP (BX:US) will invest $200 million in the maker of colorful plastic clogs.
The shares climbed 21 percent to $16.14 at the close in New York, the biggest gain since August 2009. Niwot, Colorado-based Crocs has risen 12 percent this year, compared with a 29 percent advance for the Standard & Poor’s 500 Index.
Crocs has been trying to revive its fortunes after consumers tired of its trademark clogs while knockoffs cut into sales and U.S. consumer spending slumped. The Blackstone stake comes after Crocs attempted to find a buyer for the whole company, people familiar with the situation said in November.
“This investment by Blackstone was the best combination of rewarding our long-term shareholders with the attention and the resources of Blackstone while at the same time allowing us to put a fairly large investment in our stock out of the hands of the public marketplace,” Chief Financial Officer Jeff Lasher said today in a telephone interview. The board undertook a “full, exhaustive study” of various options, he said.
The shoemaker said in a statement yesterday that it will use the funds from Blackstone’s investment in convertible preferred stock to increase share repurchases to $350 million. McCarvel will step down on or about April 30. The company had been unable to buy back stock while negotiating the transaction and expects to begin repurchases in the first quarter, Lasher said in the statement. Those buybacks will reduce publicly traded common stock by about 30 percent, he said.
The preferred shares that Blackstone will acquire have a 6 percent cash dividend rate and are convertible to common stock at $14.50 a share, Crocs said. Blackstone, based in New York, will be restricted from acquiring more than 25 percent of Crocs common shares until a time frame expires for appointing directors, the shoe manufacturer said in a filing. Crocs said it will pay $2 million as a closing fee and reimburse as much as $4 million of Blackstone’s transaction fees and expenses once the sale is concluded.
Peter Rose, a spokesman for Blackstone, didn’t immediately return a phone message seeking comment.
McCarvel, who took the helm in March 2010, expanded the company’s products to include other styles of footwear and opened new stores. The board (CROX:US) has begun an outside search for his replacement, and Lasher said the process is in the early stages.
“The change in management will inspire some value-focused investors who maybe were reluctant to look at the shares prior because of all the previous missteps of the last management team,” Corinna Freedman, an analyst at Wedbush Securities in New York, said today in a telephone interview.
Crocs has installed new processes giving it quicker sales and trend data that should enhance its ability to forecast results starting next year, Lasher said.
The company will focus on improving financial performance, particularly in the Americas and Japan and may “moderate” its investment in new stores, Chairman Thomas Smach said in the statement.
Crocs will continue its strategy of expanding to offer comfortable shoes for all four seasons, Lasher said.
The company said fourth-quarter revenue will be at the low end of its guidance range of $220 million to $225 million and its diluted loss per share may be at the wider end of its forecast of 20 cents to 23 cents. The average of nine analysts’ estimates (CROX:US) compiled by Bloomberg was for a loss of 19 cents a share.
The shoemaker also expects charges of $47 million to $52 million in the fourth quarter, which is an additional loss per diluted share of $0.45 to $0.50. The charges take into account additional costs such as expenses related to the Blackstone transaction and asset impairments.
Further restructuring charges may be necessary in 2014, Crocs said.
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