Business

Crocs shares up on Blackstone investment

Ailing footwear brand Crocs, whose shares are down 7.4 percent in 2013 amid lower profits and soft sales in Japan, will get a $200 million investment from Blackstone Group.

News of the investment, which came late Sunday has shares of the Niwot, Colo.-based company surging 13 percent in pre-market trading on Monday.

Under the deal, Blackstone will receive preferred shares paying 6 percent interest — equal to 13 percent of the company. The private equity giant will also get two board seats.

The preferred shares will convert to shares of common stock at a conversion price of $14.50 per share.

In addition, the maker of the colorful clogs said CEO John McCarvel will retire in April and will also give up his seat on Crocs’ board.

“We will recruit a new CEO who will work with the reconstituted board to refine our short-term and long-term strategic plans, which will include a sharper focus on earnings growth with less emphasis on top-line growth,” Chairman Thomas Smach said in a statement.

The 11-year old company will use the proceeds of the Blackstone investment to help pay for a $350 million stock repurchase it expects to launch in the first quarter.

Crocs posted a 2 percent decline in sales for the third quarter, hurt by weakness in the Americas and Japan. The company said it saw less discretionary spending for footwear, apparel and other consumer goods in the US.

The company now expects fourth-quarter revenue to be at the low end of the previously provided outlook range of $220 million and $225 million, while it expects loss per share to be near 23 cents.

Crocs shares closed Friday at $13.33.

Analysts, on an average, were expecting fourth quarter loss per share of 20 cents on revenue of $222.3 million, according to Thomson Reuters I/B/E/S.

Moelis & Co LLC was the financial advisor and Perkins Coie LLP provided legal counsel for Crocs.

Blackstone was advised by Piper Jaffray & Co while Simpson Thacher & Bartlett LLP acted as legal counsel in connection with the investment.