Skechers’ $9.4 Billion Buyout Faces Legal Crossroads: Governance, Valuation, and Tariff Pressures Collide

Leadership Continuity vs. Control Dynamics

While CEO Robert Greenberg and his leadership team will remain post-close[1][6][7], the Greenberg family’s 60% voting power via super-voting Class B shares created inherent conflicts. The written consent approval mechanism bypassed traditional shareholder meetings, triggering Delaware appraisal rights concerns under Flinn Flexer v. Runtriz precedent[18]. This accelerated process limited minority investors’ ability to challenge terms despite the 30-day premium window[3][6].

Governance Storm: The Shareholder Litigation Landscape

Key Allegations in the Key West Complaint

The Florida pension fund’s lawsuit centers on three critical failures: 1) Alleged suppression of competitive bidding through exclusive negotiations with 3G[5][9][14], 2) Inadequate SEC disclosures regarding deal rationale and valuation metrics[19][20], and 3) Self-dealing concerns given the Greenbergs’ $1 billion+ payout[11][17]. Plaintiffs argue the absence of a Schedule 13E-3 filing deprived investors of material information required for informed consent[20].

Broader Implications for Family-Controlled Entities

With 92.6% of Class B shares and 55.7% total voting control[8], the Greenbergs’ dual-class structure exemplifies the tension between founder vision and minority rights. The case echoes recent debates over sunset provisions for supervoting shares – particularly relevant given Skechers’ 85-year-old CEO[11][15]. Analysts note the deal’s surprise factor contradicts Skechers’ historical positioning as a perpetual family enterprise[12][19].

Financial Engineering & Sector Headwinds

Valuation Metrics in Turbulent Markets

At 13x 2024 net income[3], the deal multiple appears conservative compared to Nike’s 25x forward P/E. However, Skechers’ China exposure – 16% Q1 sales decline[19] – and $9 billion tariff-impacted revenue[2][14] justify some discount. The transaction’s 1.25x revenue multiple trails recent apparel sector deals but aligns with 3G’s value-focused entry strategy[3][12].

Debt Financing & Balance Sheet Pressures

JPMorgan’s debt commitment[1][2] faces scrutiny given rising rates and retail sector volatility. With 3G’s typical 30% EBITDA margin targets[12], Skechers would need to nearly double current 15.4% margins[6] – challenging given its comfort-footwear positioning versus premium brands.

Regulatory & Operational Risk Matrix

Tariff Overhang and Supply Chain Realignment

President Trump’s 25% footwear tariffs[11][14] directly impact Skechers’ China-centric manufacturing. The company’s April 2025 guidance withdrawal[14][15] signals structural vulnerabilities that 3G’s operational playbook – including potential nearshoring – must address. Comparable moves by Nike and Adidas suggest multi-year transition timelines with 300-500bps margin drag[11][15].

Antitrust and FDI Considerations

While no direct overlaps exist with 3G’s portfolio, CFIUS may review Chinese manufacturing ties given recent expanded jurisdiction[16]. The HSR filing deadline (9-Jun-25)[8] remains tight, with potential second requests extending timeline uncertainty into Q3.

Strategic Crossroads: Paths Forward

Litigation Outcomes and Deal Contingencies

The lawsuit’s injunction request[20] could delay closing beyond Q3 2025, triggering MAC clauses. Historical precedents show 78% of M&A suits settle with supplemental disclosures[17][18], but the Greenbergs’ control position reduces settlement pressure. A successful appraisal rights claim could see 14-19% payout increases based on Dell and Aruba precedents[18].

3G’s Playbook: From Burgers to Sneakers

The firm’s transition from QSR (Burger King) to apparel tests its zero-based budgeting model. Skechers’ DTC shift (18% online sales) offers cost rationalization opportunities, but brand equity risks mirror Kraft Heinz’s innovation stumbles[12][17]. Success hinges on balancing margin discipline with sneakers’ fashion-cycle demands.

Conclusion: Precedent-Setting Implications

This transaction underscores critical tensions in modern M&A: founder legacy vs. shareholder democracy, tariff resilience in globalized supply chains, and PE’s evolving role in consumer discretionary sectors. For dealmakers, it highlights the growing necessity of:
1) Enhanced fairness opinions in controlled company sales
2) Proactive 13E-3 compliance even in written consent deals
3) Tariff stress-testing in cross-border valuations
As courts weigh these arguments, the outcome may redefine governance standards for the 43% of S&P 500 firms with dual-class structures.