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Crocs Shares Soar on Blackstone Partnership

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Crocs Shares Soar on Blackstone Partnership

Crocs (NASDAQ:CROX) are perhaps the ugliest shoes on the planet, but apparently not everyone thinks so and consequently shares were sent soaring. On Monday it was announced that Blackstone (NYSE:BX) would be taking a sizable position in the lightweight footwear company.

Crocs announced late Sunday night that it has entered into a partnership with Blackstone, who will purchase $200 million of Crocs convertible preferred stock. The company has made it clear in recent months that it was looking to do some sort of shareholder friendly deal, the market just didn’t know when the deal would hit the wires.

In conjunction with the Blackstone deal, Crocs said it will revise its capital structure to allow a $350 million stock repurchase program, which CFO Jeff Lasher said should begin in the first quarter of 2014.

The preferred stock purchased by Blackstone represents a 13% stake in the company. The preferred shares will carry a 6% cash dividend rate and be convertible into shares of common stock at a conversion price of $14.50 per share. According to Crocs, this conversion price represents a 9% premium to the closing price of $13.33 per share on December 27, 2013.

Blackstone did offer some comments to the deal through Prakash Melwani, senior managing director and chief investment officer of Blackstone’s private equity group. Mr. Melwani stated that “Blackstone sees tremendous opportunity in the Crocs brand and global franchise. The company has the infrastructure and products to enable continued growth across the wide range of geographies and channels through which it operates,”

Following the news shares of Crocs were quickly sent to the upside. Shares of the company closed higher by more than 20 percent to $16.14 per share. At these levels, shares trade at an 11 percent premium to the convertible offering.

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