Payless Agrees to Acquire Stride Rite For About $800 Million

Footwear retailer Payless ShoeSource on Tuesday agreed to acquire Stride Rite , which makes children's shoes, for about $800 million plus the assumption of debt.

The all-cash offer is valued at $20.50 per share, which represents a 33% premium over Stride Rite's closing price Tuesday of $15.45. The sale price is also higher than the 52-week peak of $18. Stride Rite soared $4.55 to $20 in after-hours trading.

When the deal closes, Payless ShoeSource said it will rename the company Collective Brands Inc. This holding company will operate three stand-alone business units: Payless stores, Stride Rite and Collective Licensing International, which Payless acquired in March.

Collective Brands will be listed on the New York Stock Exchange and will be based in Topeka, Kan., along with Payless ShoeSource. Stride Rite's headquarters will remain in Lexington, Mass., and Collective Licensing will stay in Denver.

Each of the individual operating units will retain their own names and operations.

The transaction is expected to close in the third fiscal quarter of 2007.