By Sabrina Escobar

Skechers USA has agreed to sell itself for a 30% premium to the investment firm 3G Capital, which sent the stock soaring on Monday.

3G will pay investors $63 a share in cash for all outstanding Skechers shares, representing a 30% increase to the sneakers company's 15-day volume-weighed average stock price.

Existing shareholders also have the option to receive $57 in cash and one unlisted, nontransferable equity unit in a newly formed private company that will be Skechers' corporate parent.

How shareholders choose to receive their buyout will influence the deal's final value, but back-of-the-envelope math suggests the price could be as much as $10 billion. Skechers shares closed at $49.37 on Friday for a market capitalization of about $7.4 billion.

The stock was up 24.7% to $61.59 in early morning trading, on pace for its largest percent increase since October 2017, when the company posted a shockingly strong earnings report, according to Dow Jones Market Data. The S&P 500 was 0.5% lower.

Needham analyst Tom Nikic wrote that while it's "certainly possible" that another buyer could swoop in with a higher bid, there are a few challenges that would make it unlikely.

For one, all the economic uncertainty would mean that a buyer would have to accept a certain degree of volatility in the near term. Plus, a competing buyer would have to make a substantially better offer. Lastly, Nikic notes that Skechers has a "somewhat adversarial" nature with a couple of its larger peers -- Nike and Adidas have both sued Skechers in the few years.

"All in, it seems to us that the most likely scenario is that the deal goes through as-is," he said.

The transaction is expected to close in the third quarter.

Still, Nikic called the deal "very surprising," given that Skechers has always been viewed as a family business that wasn't for sale. The company's founding family, the Greenbergs, owns about 60% of the voting rights.

CEO Robert Greenberg will keep the top job when the company goes private, and plans to keep implementing its strategic initiatives. But, as Nikic noted, Greenberg is in his 80s and could decide to retire soon.

To his first point about economic uncertainty, Nikic wrote: "The decision may have been accelerated by the macro environment (tariffs, consumer sentiment, China-US relations, etc.), as the company may wish to navigate these challenges without being under the Street's scrutiny."

Impending tariffs on imports from many Asian countries were set to put Skechers in a tough spot because the company sources heavily from that part of the world, including China and Vietnam.

The company withdrew its full-year financial guidance year in late April, citing the unpredictability tied to the economy.

Management outlined a plan to offset the duties, including sharing costs with vendors, increasing prices in the U.S., and taking a hit to profits to lessen the impact to consumers.

Skechers has been on a growth streak, mostly pushed by the appeal of its low-cost footwear to budget-conscious, inflation-weary consumers. Revenue for the fiscal year that ended last December was about $9 billion, nearly double of December 2020's $4.6 billion.

The premium value attached to the deal is a much-needed vote of confidence in footwear companies, which have been weighed down by investor concerns over how much tariffs will hurt an industry that relies heavily on Asian manufacturing.

Shares of Skechers' competitors were also rallying on Monday, even though the broader market was in the red.

All up were Crocs, 3.4%; Asics, 4.8%; Puma, 3.2%; Adidas, 0.6%, Deckers Outdoors, 1.6%; and On Holding 0.9%. Nike was down 1.5%.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 05, 2025 11:28 ET (15:28 GMT)

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