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Steven Madden (SHOO) could see its former CEO and namesake, Steve Madden, make a private equity-backed bid for the company, a source familiar with the situation and two industry bankers told dealReporter. The company has received unsolicited approaches from more than one party, which both the source and one banker agreed was accurately reported to include Brown Shoe Company, based in Missouri, and more than one private equity firm. The second industry banker said he had heard that Steven Madden had reached out to Lion Capital before hiring Peter Solomon to explore strategic alternatives, and that Lion Capital would be interested in applying its footwear expertise to Steve Madden after selling Jimmy Choo to Towerbrook Partners earlier this year.
Rumours that Wolverine World Wide had made an approach were not true, the source familiar said.
Currently, Mr Steven Madden serves as an outside consultant to the company. He was sentenced to more than three years in jail for conspiracy to commit money laundering and securities fraud and released from prison in 2005. Madden is permitted to return to the company as a manager in June of 2008.
“He’s going to come back regardless of whether the company has a new owner with public or private shareholders,” the source said.
Madden owns about 10.2% of shares outstanding and the company has USD 79.2m in cash. An analyst said Madden’s criminal record would not likely be a hindrance to his involvement in a buyout of the company.
The analyst said the company could sell for around USD 30 or 32 per share and while shareholders would be satisfied with that price, the stock would still be undervalued. Steven Madden’s stock price, which declined 45% in the past year, was hit primarily by weakness in the fashion footwear industry. Despite declining in YOY profits, the company has growth prospects in brand extensions, men’s shoes, and international opportunities, making it an attractive takeout target, an analyst said.
The industry banker said that Lion Capital’s sale of Jimmy Choo was for 13.5X EBITDA, and Steve Madden would probably garner a slightly smaller multiple because it is a more mature brand that is not luxury.
The source said shareholders would hope for an offer that is close to a 40% premium to the company’s stock price, or a more typical premium to the company’s 52-week average stock price. Steven Madden’s 200-day moving average is USD 27.21 per share. The company’s share price has hovered around USD 22 per share since it announced the hiring of Peter J Solomon to explore strategic alternatives on 19 October. A 40% premium would value the company at USD 686m, which is an approximate 10x EBITDA multiple.
The company has experienced shareholder activism from Clinton Group, which had been pressuring the company to buy back shares but last week issued a letter approving of the company’s potential sale. Previous reports stated the company has experienced pressure to sell or buy back stock from other parties in addition to Clinton.
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