Crocs shares rise as Blackstone takes stake
Shares of Crocs Inc., maker of the colorful plastic clogs, rose the most in more than four years Monday after an announcement that chief executive officer John McCarvel would retire and Blackstone Group L.P. would invest $200 million in the company.
The stock climbed 21 percent to close Monday at $16.14, the biggest gain since August 2009. Shares for Crocs, based in Niwot, Colo., have risen 12 percent this year, compared with a 29 percent advance for the Standard & Poor's 500 Index.
In recent years, competition from lower-priced knockoffs of its trademark footwear and lagging consumer interest have prompted Crocs to try to revive its fortunes.
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 Monday in an interview.
The board undertook a "full, exhaustive study" of various options, Lasher said.
In a statement, Crocs said it would use the funds from Blackstone's investment in convertible preferred stock to increase share repurchases to $350 million.
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 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, did not immediately return a phone message seeking comment.
McCarvel will step down on or about April 30. He took the helm in March 2010, and expanded Crocs' products to include other styles of footwear and opened new stores.
The board has begun an outside search for his replacement, and Lasher said the process was 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 Monday.
Lasher said Crocs had installed new processes giving it quicker sales and trend data that should enhance its ability to forecast results starting next year.
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 that fourth-quarter revenue will be at the low end of its guidance range of $220 million to $225 million, and that its diluted loss per share may be at the wider end of its forecast of 20 cents to 23 cents.
BY THE NUMBERS
Monday's closing price for Crocs Inc., a 21 percent increase, and the stock's biggest one-day gain since
Investment that Blackstone Group plans to make
Limit on ownership of Crocs by Blackstone.
Year John McCarvel became president and CEO of Crocs.