In a statement footwear label Crocs Inc said, it would acquire privately owned rival Heydude for $2.5 billion.

The deal underscores an increased demand in the pandemic-led market for casual shoes.

Following multiple lockdowns, consumers ditched dress shoes for more comfortable footwear, benefiting companies such as Ugg brand owner Deckers Outdoor Corp  and Crocs.

Demand for casual shoes has remained firm this year as well.

In a statement Crocs said, it would fund the deal through a term loan, and by issuing $450 million in Crocs shares to Heydude founder and Chief Executive Alessandro Rosano.

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

With the news reaching the market, shares of Crocs  fell about 15% in early trading.

“I do think it is a large deal for Crocs and that usually makes investors nervous. I think in the short-term it will have an impact on margins as they merge and streamline processes,” said CFRA Research analyst Zachary Warring.

Founded in 2008, 43% of Heydude’s sales comes from online channels, said Crocs. Heydude, known for its lightweight casual shoes, is expected to make about $570 million in revenue in 2021. In comparison, Crocs, which brings in 37% of its sales through its e-commerce division, in October forecast its 2021 revenue to grow 62%-65% from the $1.39 billion it recorded last year.

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