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Goldman Sachs Analyzing a Potential LBO for Crocs

Goldman Sachs Analyzing a Potential LBO for Crocs

On November 13, Crocs (NASDAQ: CROX) revealed the company is considering strategic options that may include going private.

Analysts Taposh Bari and Chad Sutherland at Goldman Sachs (NYSE: GS) released a detailed report on Tuesday, which analyzed the potential for a leveraged buyout (LBO) for the company.

Any price tag on a deal has to have a 20 percent premium to the company's stock price. The analysts noted that a 20 percent premium translates to a lower valuation than the company held for comparable deals in 2010.

Related:Crocs Said to Explore Strategic Options

The average premium of similarly structured deals since 2010 amounted to 23 percent.

The analysts noted that the company holds $332 million in cash, 97 percent of which is overseas. Should a new owner wish to repatriate the funds, it will come with a $53 million repatriation penalty based on the company's 10Q published on October 30. A large private equity investor should not have a need to immediately access the cash. The company has a $100 million revolving credit facility already in place.

The analysts estimated a total deal size (including investment banking fees) would total $1.5 billion. At a leverage target of 5.5X and a 20 percent equity premium, $860 million in new debt would need to be issued. A potential deal would require an equity sponsor contribution of $300 million, representing around 26 percent of the enterprise value.

The analysts concluded that a potential purchase price could come in at $16.30 a share, representing a further 18 percent upside based on the opening price the same day Goldman Sachs issued its report.

Posted-In: 10Q Chad Sutherland Crocs LBONews Rumors Financing Trading Ideas Best of Benzinga


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