Crocs plunges after announcing US$2.5B Heydude purchase

Crocs Inc. tumbled the most in more than a year after agreeing to buy casual-shoe brand Heydude for US$2.5 billion in an effort to bolster its fast-growing business of offbeat footwear.

Crocs Inc. tumbled the most in more than a year after agreeing to buy casual-shoe brand Heydude for US$2.5 billion in an effort to bolster its fast-growing business of offbeat footwear.

The purchase will be funded by US$2.05 billion in cash and US$450 million in Crocs shares issued to Heydude founder Alessandro Rosano, according to a statement Thursday. Crocs said it expects the deal to immediately add to its sales growth and earnings, while the combined operations will generate “significant” free cash flow.

The agreement underscores the rapid expansion of Crocs’ business as its once-derided foam clogs catch on with a hip Gen Z crowd. Crocs has said it expects revenue growth of as much as 65 per cent this year. Heydude, which will operate as a stand-alone division, makes lightweight, casual shoes and sandals for men, women and children.

Crocs shares dropped 11 per cent to US$124.50 at 9:50 a.m. in New York after sliding as much as 12 per cent, the most since April 2020. The stock had doubled this year through Wednesday’s close. 

The deal for closely held Heydude is expected to close in the first quarter. Crocs expects to fund the cash component with a US$2 billion term loan B facility and borrow US$50 million under its existing senior revolving credit facility.

Standard & Poor’s placed Crocs, which has a BB- rating, on credit watch with negative implications.