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TOPEKA, KS-Payless ShoeSource Inc. and the Stride Ride Corp. have struck a deal for Payless to acquire Stride Rite for $800 million in an all-cash deal that will produce a new company, Collective Brands Inc., that will hold licenses for some of the footwear industry’s top brands. Payless and Lexington, MA-based Stride Rite say that the transaction—a $20.50 per share deal—will create a footwear giant with specialties in fashion, design and athletic shoes.

The newly constituted company will consist of three business units: Payless, Stride Rite and Collective Licensing International. Payless will focus on fashion and design in its chain of nearly 4,600 stores, while Stride Rite will continue to focus on lifestyle and athletic-branded footwear, with Collective Licensing International to specialize in brand management and global licensing of youth, lifestyle and high-quality fashion athletic brands.

Following completion of the transaction, which is expected to close in the third quarter, Matt Rubel, CEO and president of Payless, will serve as CEO of Collective Brands. Collective Brands, Inc. will remain listed on the New York Stock Exchange and, along with Payless ShoeSource, will maintain its headquarters in Topeka. Stride Rite’s headquarters will remain in Lexington.

Rubel said in a statement that the transaction was driven by its strong growth potential in a footwear industry where name brands have grown faster than private label or designer categories over the past five years. The deal also recognizes the growth in children’s footwear, which is among the fastest growing sectors in the industry.

One facet of the deal is the prospect for growth in off-mall retail locations such as in lifestyle and outlet centers, which “are increasingly preferred by consumers,” the companies point out. Stride Rite stores “are currently under-penetrated in these shopping venues,” so the newly formed company will pursue a real estate strategy designed to increase its presence in such venues.

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