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Crocs, Inc. Announces Financial Partnership With Blackstone, Expands Share Repurchase Plan, Announces CEO Retirement

Stocks in this article: BX CROX

NIWOT, Colo., Dec. 29, 2013 /PRNewswire/ -- Crocs, Inc. (NASDAQ: CROX) today announced that an investment fund affiliated with Blackstone has agreed to purchase $200 million of newly issued series A convertible preferred stock (the "Preferred Stock").


In connection with the investment, Crocs intends to revise its capital structure to accommodate a $350 million stock repurchase program approved by its board of directors. This includes using the net proceeds of approximately $180 million from the Preferred Stock as well as excess cash to fund the repurchase plan.  "We will add $200 million of long-term non-publicly traded preferred equity and the stock repurchase program, when completed, will reduce our publicly traded common stock float by approximately 30% (at today's market price), while maintaining a strong net cash position on our balance sheet.  We expect these initiatives to reduce volatility in both our common stock price and our shareholder base and provide a strong foundation to unlock long-term value for our shareholders," said Jeff Lasher, Crocs chief financial officer.  "We've been unable to repurchase stock while negotiating this transaction, but we now expect to do so beginning in the first quarter of 2014.  We intend to be patient, methodical and opportunistic as we execute this expanded buyback plan."

The Preferred Stock will have a 6.0% cash dividend rate and is convertible into shares of common stock at a conversion price of $14.50 per share.  This conversion price represents a 9% premium to the closing price of $13.33 per share on December 27, 2013, and a 10% premium to the 30-day average closing price of $13.19 per share.  On an as-converted basis, the Preferred Stock will represent 13.8 million common shares, or approximately 13% of the fully-diluted common shares outstanding after giving effect to the issuance.

At any time after three years from the issuance date, if the closing price of Crocs common stock equals or exceeds $29.00 (i.e., 200% of the conversion price) for a period of 20 consecutive trading days, then the shares of Preferred Stock will, upon notice from Crocs, convert into shares of common stock.  At any time after eight years from the issuance date, Crocs will have the right to redeem, and the holders of the Preferred Stock will have the right to require Crocs to repurchase, all or any portion of the Preferred Stock at 100% of the stated value plus any accrued but unpaid dividends.

Consummation of the investment is subject to the satisfaction of customary closing conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in January 2014.

John McCarvel also announced his intention to retire as president, chief executive officer and board member on or about April 30, 2014.  "It has been an honor to be part of the Crocs global team for the past decade and to lead it since 2010," Mr. McCarvel said.  "We've made tremendous progress as a company over these past 10 years – from a one-season, one-shoe, and one-country brand to a diversified, four-season global footwear leader that is on solid financial footing.  The investment by Blackstone is a vote of confidence in our company and our brand, and Crocs will benefit from Blackstone's financial, consumer, retail and brand experience and relationships."  The board has begun an outside search for Mr. McCarvel's replacement.

"John's contributions to this company are immeasurable," said Thomas J. Smach, Crocs chairman of the board.  "As our CEO, he led a turnaround of Crocs and established it as a profitable, diversified company with more than $1 billion in annual revenue, strong cash flows, and a robust balance sheet with more than $300 million in net cash.  Under his leadership, Crocs has grown into a global branded company that employs 4,500 people and sells over 55 million shoes per year in more than 90 different countries.  On behalf of the company's employees and directors, I would like to extend our appreciation and gratitude to John and wish him and his family continued success as he pursues his personal endeavors."

With its investment, Blackstone will be entitled to two seats on the Crocs board of directors.  "We expect Blackstone to contribute a great deal of value to our board through its financial, consumer, retail and brand experience and its global footprint," Mr. Smach said.  "While Blackstone's investment will represent only 13% as-converted ownership at closing, we believe our company, shareholders, and employees will benefit from 100% of the firm's focus, resources, expertise and efforts to create shareholder value.  We believe this transaction provides a fantastic opportunity for our shareholders to participate alongside Blackstone and benefit from its efforts to realize very attractive future returns." 

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