Updated from 4:38 p.m. EDT

Payless ShoeSource

(PSS)

plans to buy

Stride Rite

( SRR) for $800 million, a move that will expand the discount-shoe retailer's scope into the wholesale and licensing businesses.

Payless will pay $20.50 a share for Stride Rite, representing a 32% premium over the company's closing price Tuesday.

Upon completion of the deal, expected in the fiscal third quarter, Payless expects to rename itself Collective Brands and operate as a holding company with three standalone business units.

These units will consist of Payless stores, a nearly 4,600-store retail chain; Stride Rite, a children's footwear wholesaler and retailer; and Collective Licensing International, a brand licensing concern. Payless CEO Matthew Rubel will serve as CEO of the holding company, overseeing the three businesses.

"This transaction is squarely on strategy and driven by its strong growth potential," said Rubel. "Through this acquisition and as indicated by the change in our name, we are creating a leading, innovative global footwear, accessory and lifestyle brand company that is well positioned to grow in both our key domestic and international markets."

Stride Rite owns or licenses brands such as Keds, Saucony and Sperry-TopSider. The company will retain its headquarters in Lexington, Mass., following the deal, while Payless will continue operating out of Topeka, Kan.

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