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Collective Brands Split Is Good for the Sole


Wolverine World, Blum Capital, and Golden Gate will split the goods.


Collective Brands (PSS) is pairing off, and Sperry's could be the first to venture out on its own. Bloomberg revealed today that Chief Executive Officer of Wolverine World Wide (WWW), Blake Krueger, said the top sider distributor is looking to open up its own retail stores, many of which will be erected overseas.

Collective Brands, known for its plethora of footwear companies, is likely to split its many brands apart at the end of 2012, as the corporation was recently acquired by private equity firms Blum Capital Partners and Golden Gate Capital, and Wolverine World Wide. Following a slew of store closings and rocky business, the companies (which include Payless Shoe Source, Saucony, Sperry, Stride Rite, Keds, and Airwalk), have finally found stable ground to stand on.

The deal, which included a $1.32 billion payout, will likely become effective toward the final few months of the year. At that time, Collective Brands will be forced to become an empty nester, as all of its babies will be dispersed to three new owners.

The break-up will go something like this: Wolverine World Wide will acquire Sperry, Saucony, Stride Rite and Keds, while Blum Capital and Golden Gate will take Payless and Collective's international-licensing arm. Plans are already underway to ensure that the acquisition not only goes smoothly, but that each brand will expand in its own right -- hopefully adding about $0.25 to $0.40 earnings per share in 2013.

The Wall Street Journal noted Wolverine's anticipatory efforts in an article last week.

"Krueger said 4% of Sperry's revenue was generated outside of North America though he believes the brand's strong women's business, youthful image and broad range of prices makes it ideal for international expansion," the Wall Street Journal reported.

These comments definitely appear to have some truth behind them, as Krueger stated today the innovative brand is projected to triple to $1 billion in sales through aggressive global growth. However, analysts may not become believers in this turnaround story right off the bat.

Sterne Agee is not thrilled with the acquisition overall. The research firm reported last week that Wolverine may have taken on too large of a responsibility by purchasing such a complex case, despite its previous merger experience in the past.

"We are suspect of WWW's ability to make any meaningful improvement in the near term. While WWW's management has done an admirable job with the acquisitions of smaller brands such as Cushe and Chaco, Sebago has taken some time to gain momentum," analysts at Sterne Agee recently said.

Conversely, the Wall Street Journal reported that analysts have commended the timing on the deal. Although Collective Brands surely poses a challenge to its acquirers, it seems management can rest easy for the moment while research firms agreed that the transition makes sense.

As Collective Brands continues to try and pick itself up by the bootstraps, the company's soon-to-be owners are plotting business development plans that are sure to help the brands tread all over the competition, and eventually the world.

Collective Brands is currently trading at $21.26, up 47.95% YTD, while Wolverine is trading at $42.38, up 17.62% YTD.
Editor's Note: This content was originally published on by Katey Stapleton.

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