THE DEAL: Deckers pays $120 Million for Sanuk

Date: 20-May-2011

By Richard Collings

Here's a deal that may not incite "uggs" from investors.

Deckers Outdoor Corp., parent of the Australian-based Ugg brand of footwear, announced on Friday, May 20, that it reached a deal to acquire Sanuk U.S.A. LLC and C&C Partners Ltd., the exclusive licensees of the Sanuk shoe brand in the United States, Europe and Canada.

Goleta, Calif.-based Deckers will pay $120 million in cash for the two businesses, plus an unspecified additional payment based on the targets hitting performance milestones in the first five years after the deal's completion. Deckers will fund the deal from its cash on hand.

According to its latest 10-Q filing, Deckers had about $438 million in cash and cash equivalents for the quarter ending March 31.

Sanuk and C&C generated a total of $43 million in net sales last year.

The deal is expected to close in the third quarter of 2011 and be slightly accretive to earnings in 2011, before transaction costs. Sanuk's headquarters will remain in Orange County, Calif.

Sanuk, translated as "fun" in Thai, is best known for its sandals and makes active footwear as well. It is sold by retailers Nordstrom Inc., Fred Segal, Bass Pro, Dillard's Inc. and The Buckle, among others.

Deckers' financial adviser, Peter J. Solomon Co.'s Cathy Leonhardt, said the deal is "not a story of synergies." Instead, she said, Sanuk provides Deckers with another high-growth brand to invest in.

Leonhardt said Sanuk and many of Deckers' brands, including Ugg, focus on comfort, a very popular trend in fashion and footwear in general. She also said that Sanuk provides Deckers with an "authentic brand" that could be taken into other categories outside footwear such as apparel.

Stradling Yocca Carlson & Rauth's David E. Lafitte served as Deckers' legal adviser. Sanuk and C & C Partners took financial advice from Richard Anderson and Geoffrey Haydon of Moss Adams Capital LLP and legal counsel from Daniel P. Murphy LP.

Deckers shares traded down about 2%, to $88 per share, Friday afternoon, giving the company a market capitalization of about $3.42 billion.

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