Collective Brands, Inc. (PSS) recently announced the early termination of Hart-Scott-Rodino waiting periods in connection with its pending merger with a group of buyers including footwear giant Wolverine World Wide, Inc. (WWW).

In May 2012, Collective Brands, a leading lifestyle footwear and accessories brand company, agreed to be bought by a group of companies comprising Hush Puppies owner Wolverine World Wide and private equity firms Blum Strategic Partners and Golden Gate Capital Opportunity Fund. The purchase consideration will be $21.75 per share in cash or around $2 billion including debt.

Per the terms of the merger agreement, Wolverine World Wide will acquire Collective Brands’ Performance + Lifestyle Group (PLG) unit. The PLG unit sells footwear and related products, both wholesale and retail, for children and adults under popular brands including Stride Rite, Sperry Top-Sider, Saucony, and Keds. The other two units, Payless ShoeSource and Collective Licensing International, will be jointly taken up by Blum Capital and Golden Gate. The units will operate as a separate standalone entity. Payless ShoeSource is one of the largest footwear retailers in the world selling a broad assortment of footwear and accessories through owned or franchised stores. Collective Licensing International is a global licensing company focused on marketing and building brands for the youth.

The transaction is still subject to shareholder approval and some other customer closing conditions.

Our Recommendation

Collective Brands is riding high on the news of the merger and consistently strong earnings results. We currently have an Outperform recommendation on Collective Brands. The stock carries a Zacks #1 Rank (short-term ‘Strong Buy’ rating).

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