Crocs to Acquire HEYDUDE for $2.5B; Shares Plunge 11.6%

Crocs, Inc. (NASDAQ: CROX) inked a deal to acquire HEYDUDE in a cash-cum-stock deal worth $2.5 billion.

CROX acquired the privately-owned casual footwear brand with an aim to become a global leader in casual footwear; however, investors were not impressed.

Following the news, shares of the manufacturer of foam clogs and innovative casual footwear for women, men, and children sank 11.6% on December 23 to close at $123.53.

Synergies from the Acquisition

Founded in Italy in 2008, HEYDUDE designs comfortable, innovative, ultra-light comfort and casual footwear and accessories. Over the last few years, the company has witnessed robust growth in revenue and profits.

The addition of HEYDUDE’s casual, comfortable and lightweight products will compliment Crocs portfolio.

Furthermore, the deal is expected to be immediately accretive to revenue, margins, and earnings. The company also forecast the acquisition to generate significant free cash flow. The deal is expected to lead to deleveraging, and further investments to aid future growth.

The acquisition is expected to close in the first quarter of 2022, subject to certain regulatory approvals.

Details of the Deal

Crocs will pay $2.05 billion in cash. Additionally, HEYDUDE founder and CEO Alessandro Rosano will receive Crocs shares worth $450 million. The share allocation will be based on the average of the daily volume-weighted average price of Crocs shares, for the 20 days immediately prior to the date of the agreement.

To fund the deal, the company plans to enter into a $2 billion Term Loan B Facility. It will borrow $50 million under the existing senior revolving credit facility to fund the cash consideration.

Upon completion of the acquisition deal, HEYDUDE will function as a standalone division of Crocs.

CEO Comments

Crocs CEO, Andrew Rees, commented, “With the acquisition of HEYDUDE, we are thrilled to add another high-growth, highly profitable brand to our portfolio.”

Sharing his vision, he added, “We intend to leverage our global presence, best-in-class marketing and scale infrastructure to build upon HEYDUDE’s strong foundation and create significant shareholder value.”

Wall Street’s Take

Top Research Firms reiterated their Buy rating on the stock following the acquisition news.

Robert W. Baird analyst Jonathan Komp reiterated a Buy rating on Cords with the price target of $250 (102.4% upside potential) on the stock. The analyst sees the current drop in Crocs shares price as “a compelling” buying opportunity.

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average Crocs price target of $194.20 implies 57.2% upside potential to current levels.

Bloggers Weigh In

TipRanks data shows that financial blogger opinions are 100% Bullish on Crocs stock, compared to a sector average of 71%.