It was announced today that a joint group, including Wolverine Worldwide (WWW), Golden Gate Capital and Blum Capital Group will buy and split up former best idea portfolio holding Collective Brands (PSS) for $21.75 per share, plus the assumption of all debt, which values the deal around $2 billion. Wolverine will take control of the brand portfolio, which includes Sperry Top-Sider, Keds, and Saucony, while the private equity firms will take the Payless domestic and international stores. The deal expects to officially close in the back-half of 2012.
While the shares closed below this premium, we don’t think investors would be wise to engage in arbitrage in this situation. We think the deal was very reasonable for shareholders, and we think the rise in the share price over the last several months can be attributed to these take-out rumors rather than an increasingly brighter financial future. Therefore, we don’t expect a bid in excess of $21.75, and we don’t think holding until the close (which would result in a gain of less than 3%) represents a very good investment opportunity.
Note: We closed out our position in Collective Brands in our Best Ideas portfolio earlier this week for a 38% gain on cost.