Skechers Isn’t Denying Reports of Kohlberg Kravis Buyout

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Investors and employees are waiting for the other athletic shoe to drop on a possible leveraged buyout at Manhattan Beach-based Skechers Inc.


An article last week in Women’s Wear Daily’s suggested that New York-based buyout firm Kohlberg Kravis Roberts & Co. was interested in buying the popular sneaker company, possibly to merge it with Nashville-based Genesco Inc., a casual and dress shoe company that makes Dockers and Johnston & Murphy brand shoes.


Skechers stock jumped to $34.28 Monday morning, up about 10 percent, and hung around $33 for most of the week.


The company has a market capitalization of $1.5 billion, and does about $1.2 billion in annual sales.


Kohlberg Kravis declined to comment and Skechers did not return calls. Skechers did, however, release a letter to its employees stating the company does not comment on acquisition rumors. But the letter also said: “With the ready availability of significant capital in private equity funds and Skechers attractiveness as a franchise, rumors and speculation are not surprising.”


“Very strange” is how Jeff Mintz, an analyst with Wedbush Morgan Securities, characterized the letter. “I thought it was a little bit telling that there was no denial that a deal was in the works. It was essentially silent on that issue, which is unusual.”


Mintz said he was skeptical about the idea of Skechers and Genesco being combined, but he wasn’t at all surprised at a possible buyout of Skechers because he thinks the stock is undervalued.


“Skechers as a leveraged buyout makes some sense because it has an under-leveraged balance sheet, no debt and a huge amount of cash,” he said. “It makes some sense that Kohlberg Kravis would want to buy them, but it would almost certainly have to be in cooperation with management because the Greenberg family has more than 50 percent of the votes, so the deal couldn’t be done without their agreement or approval.”


Robert Greenberg is chief executive and Michael Greenberg is president of Skechers.


The company was founded in 1992 and makes athletic, casual and dress shoes for men, women and children. The brand enjoyed immense popularity from the late 1990s through 2002, but the firm struggled to rebrand between 2003 and 2005. Since the beginning of the year, however, Skechers stock has been trading at near-historic highs, above the $30 mark.


Skechers owns 144 retail stores including factory and outlet stores in the United States and 12 more stores internationally.

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