The privately held footwear label Heydude si to be acquired by Crocs Inc in a deal worth $2.5 billion, Crocs said. This is a part of its strategy of the rubber clogs producer to cash in on the pandemic-driven rise in casual shoe demand.

Consumers who were stranded at home during last year’s lockdowns swapped their dress shoes for more comfy footwear, benefitting Crocs and Deckers Outdoor Corp., which owns the Ugg brand. This year’s demand has been consistent.

Crocs stated it would pay $2.05 billion in cash, with the majority of the money coming from a term loan, and $450 million in Crocs stock to Heydude founder and CEO Alessandro Rosano.

“This is a good acquisition from Crocs. Heydude has been a strong performer during the pandemic, albeit somewhat under the radar,” Matt Powell, senior industry advisor of sports at NPD Group, said.

Following announcement of the deal, there was nearly a 15 per cent drop in the stocks of the Colorado-based Crocs.

According to CFRA Research analyst Zachary Warring, this acquisition deal does not mark a large deal for Crocs which is the reason that investors get jittery when companies make such comparatively small deals. The analyst was of the opinion that this deal would leave an impact on the margins of Crocs with the merging and streamlining of the processes of the two companies.

Crocs said that about 43 per cent of its sale revenues are generated by Heydude, which was established in Italy in 2008, from its online sale channels. It is expected that about $570 million in revenue will be mad by the firm, best known among customers for making lightweight casual shoes, in 2021.

About 37 per cent of its revenues are generated from its online sale channel by Crocs in comparison. A forecast of revenue growth of between 62 per cent and 56 per cent for 20210 compared to its revenue last year of $1.39 billion was made by Crocs in October.

Production issues because of closure of factories in Vietnam have mostly not impacted the business of Heydude. This is because most of the footwear of the company is made in Chinese factories, said Crocs Chief Executive Andrew Rees in an investment call with analysts.

But he said that global freight issues has impacted the business of the brand as it has witnessed major delays in delivery as well as increase in costs of getting its products into the United States.

(Adapted from Forbes.com)