Crocs Eats a Competitor; Buys Bite Footwear (CROX)

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Everone knows Crocs, Inc. (NASDAQ:CROX) by now.  Its meteoric stock rise is nearly unprecedented in modern footwear stocks.  The company is acquiring a competitor this morning by the name of Bite Footwear.  Bite has probably bitten as far as being a real competitor though.  With the price tag you might even wonder if Crocs just wanted to fend off what is probably a fiscally troubled future threat that a stronger competitor could have done more with.

The size of the buyout is only a $1.75 million cash payout, with the potential for an earn-out of up to $1.75 million if certain earnings targets are acheived over a 3-year period.  Bite was founded in 1996 and makes sport sandals and shoes that look eerily similar if you visit the company website.  It sells shoes for golf, adventure, healthy lifestyle, and water sports.  It looks like Crocs wants to apply its own materials into the existing manufacturing lines already in place to instantly expand its product offerings.

Crocs acquired Jibbitz last year, and a buyout of this size will be tiny for the company to integrate.  It looks like it gets some instant new designs and also some instant R&D, so for the price it sounds like a lay-up for a fast-growth footwear company.  Even if this ends up being a ‘competition killer’ as the sole ambition, this is a small price tag that won’t ever be noticed by shareholders.  So far it is being well received as Crocs shares are trading up 2% pre-market.  This is also on the heels of last week’s major earnings beat and hiked guidance.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.