Crocs shares slide after announcing a $2.5 billion acquisition

Shares of Crocs Inc (NASDAQ: CROX) slid nearly 15% this morning after the shoe company said it was set to make a sizable acquisition worth $2.5 billion.

Crocs to buy Hey Dude

In a press release on Thursday, Crocs said it will buy Hey Dude – a privately owned brand of casual shoes for $2.5 billion in cash and stock. The transaction will likely complete next year in the first quarter, subject to customary closing conditions, including regulatory approval.

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The Colorado-based company will pay $2.05 billion for the acquisition in cash. Another $450 million will be paid in stock to Alessandro Rosano; the current CEO of Hey Dude, who also founded the company in 2008.

It is likely to use a revolving credit facility to borrow $50 million and enter a Term B Loan worth $2.0 billion to fund the deal. Crocs picked Citi as its financial advisor for the deal. Including today’s price action, the stock is still up more than 90% year-to-date.

CEO Andrew Rees’ remarks

Following the acquisition, Hey Dude will become a standalone division of Crocs, and Rosano will serve as creative director and strategic adviser for the business. In the press release, Crocs CEO Andrew Rees said:

HEYDUDE’s casual, comfortable and lightweight products are aligned to long-term consumer trends and are a perfect fit for Crocs. We’ll leverage our global presence, best-in-class marketing and scale infrastructure to build upon its strong foundation and create significant shareholder value.

Crocs hired Rick Blackshaw as the Executive Vice President of Hey Dude. Blackshaw has previously served as the chief executive at CCM Hockey. In October, Todd Gordon said Crocs was “well valued” despite an over 100% year-to-date gain.