Crocs pens deal to buy back half of Blackstone preferred stake

By

Robin Driver

Published
Dec 4, 2018

Crocs, Inc. announced on Monday that it has entered into an agreement with Blackstone Capital Partners VI L.P. to buy back 50% of the investment firm’s preferred stake in the Niwot, Colorado-based footwear company for $183.7 million, or $26.64 per share.

 
Blackstone will convert its remaining preferred shares into around 6.9 million shares of the company’s common stock. The firm has also agreed not to sell or transfer these shares for a period of nine months.

The transaction is expected to result in the addition of 18 cents a share to Crocs' year-to-date earnings, as well as in the freeing up of $12 million annually previously paid in dividends to Blackstone.

As part of the deal, Blackstone’s right to nominate directors to the Crocs board has been reduced from two to one.
 
The shares were initially acquired by Blackstone in 2014 as part of a $200 million investment in Crocs and carried a 6% dividend and a conversion price of $14.50 per share, equivalent to 13.8 million shares.

Crocs shares were trading at approximately $15 at the time of the initial purchase and have since risen to $27.80. 
 
Since Blackstone made its investment, Crocs has also implemented a comprehensive turnaround plan, which has involved widespread closures of underperforming stores as well as of some production sites.
 
The strategy also revolved around an image change for the plastic clog brand, which has included collaborations with Balenciaga, Hollywood actress Drew Barrymore and rapper Post Malone.
 
“In the years following Blackstone’s investment, the Company has materially strengthened its brand, improved its operations and returned to growth, and we appreciate the support Blackstone has provided all along the way as one of our largest stockholders,” said Crocs CEO Andrew Rees in a release.

“Both the lock-up and the current intention of the Blackstone nominees to remain on our board through their June 2020 terms evidence Blackstone’s continued confidence in our strategy and business prospects,” Rees added. 
 
As a result of the transaction, Crocs has incurred a total of $101.0 million in non-recurring charges, including an additional fee of $15.0 million to be made to Blackstone.

Following the announcement of the deal, Crocs has reaffirmed its fourth-quarter and full-year 2018 outlook.
 
In Q4, the company expects to achieve between $195 and $205 million in revenues. Full-year revenue is predicted to be 4 to 5% higher than the $1.02 billion reported in 2017, while income is expected to be just under $60 million.