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Skechers: Heelys' shoe fits

August 14, 2008|Andrea Chang | Times Staff Writer

Heelys Inc., the company known for its sneakers on wheels for kids and teens, might soon be rolling over to Manhattan Beach shoe retailer Skechers USA Inc.

In an unsolicited offer Wednesday, Skechers proposed to acquire Heelys for $143 million in cash. Skechers had made a lower bid to buy Dallas-based Heelys in May but was rebuffed.

Launched in 2000, Heelys quickly became the new "it" item for kids. Retailers couldn't keep the trendy shoes in stock despite the high price, which at times reached $100. Some schools banned them out of safety concerns.

Heelys are modeled after bulky "skater shoes" worn by skateboarders. A removable wheel hidden in the heel of each shoe allows wearers to glide around much like they are on roller skates. Once the wheel is out, Heelys turn into a regular pair of street shoes.

The shoes, which are also available in a double-wheel style, even attracted a number of adult fans, including Shaquille O'Neal, who ordered a pair in size 22.

But the shoe's popularity soon fizzled and retailers were forced to slash prices, said Jeff Mintz, an analyst with Wedbush Morgan Securities in Los Angeles.

"It became a really big thing and every kid wanted a pair of Heelys," he said. "But they over-distributed it and expectations got too high, and eventually they kind of crashed."

Still, the shoes remain sought after by some kids. Sabrina Acosta, a saleswoman at a Kids Foot Locker in Lakewood, said although she hadn't received a new shipment of Heelys all year, "children still come in here asking for them."

"When we have them, they do good," Acosta said. "I bought a pair myself."

Skechers, which sells footwear worldwide through its own stores and other retailers, has earned a reputation as a hip brand for kids and adults. Ad campaigns have featured such celebrities as Ashlee Simpson and Carrie Underwood. The company also sells apparel.

In a letter to Heelys' board of directors Wednesday, Skechers Chief Executive Robert Greenberg said the company was prepared to increase its latest offer if necessary and also would consider a mixed stock-and-cash transaction.

"We believe . . . acceptance of this proposal is in the best interests of Heelys and its stockholders," Greenberg wrote. "We are excited about the prospects that the combined company would hold."

Skechers' offer was announced after the close of regular trading.

Heelys' shares rose 9.9% to $5.35 after closing at $4.87, up 2 cents, suggesting the market expects Heelys to fetch more than the $5.25 per share being offered by Skechers. Skechers shares rose 1.4% to $20.21 after finishing down 3 cents at $19.94.

If its offer is accepted, Skechers would probably try to boost Heelys' image by marketing the shoe better, Mintz said. A takeover would also extend Skechers' reach among younger consumers.

"Skechers has made a really big push into kids' footwear," he said. "So I think they see Heelys as a nice tuck-in acquisition to expand their exposure."

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andrea.chang@latimes.com

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