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K2 buys Volkl, Marker and Marmont!

post #1 of 25
Thread Starter 
Today's WSJ reports that K2 has entered into an agreement to aquire Volkl and Marker for $124 Million and assumption of debt.

Also they are buying Marmont for $84million and assumption of debt.

Hmmm, its no wonder that K2 has chosesn Marker as their Intergrated Binder for the 2004-2005 line-up.
post #2 of 25

The article for those who don't get the WSJ

The Wall Street Journal
(Copyright (c) 2004, Dow Jones & Company, Inc.)

Wednesday, June 16, 2004

Media & Marketing

K2 to Buy Three Ski-Gear Makers As It Continues Acquisition Spree

Sports-equipment maker K2 Inc. has agreed to pay more than $200 million to buy three ski-equipment makers, continuing an acquisition spree that has included more than a dozen sporting-goods companies since Richard Heckmann became chief executive in 2002. The deal, expected to be announced today, is part of K2's drive to gain leverage against the increasingly consolidated sporting-goods retail market by expanding its brand portfolio. While K2 started out making winter-sports gear, it is now a year-round company whose 35 brands include baseball-equipment company Rawlings Sporting Goods Co., Shakespeare fishing rods and paintball-equipment maker Worr Game Products.

Now, K2, based in Carlsbad, Calif., will add three closely held ski-related companies. It has agreements to acquire ski maker Volkl Sports Holding AG and bindings manufacturer Marker Group from a private investment group for a total of $124 million plus the assumption of an undisclosed amount of debt. In addition, it will buy apparel company Marmot Mountain Ltd. for $84 million plus debt.

K2 will pay for the acquisitions, which should be completed by the end of the month, through a combination of stock and cash. The company also will raise its earnings projection for this year, saying it now expects sales to total $1.13 billion, or 86 cents a share, compared with its previous forecast of $960 million, or 80 cents a share.

Packed with thousands of small specialty manufacturers and a few big players, the sporting-goods industry has been "begging for a roll-up," Mr. Heckmann said. He said K2's goal is to dominate the sporting-goods equipment industry, much as Nike Inc., Germany's Adidas-Salomon AG and Reebok International Ltd. dominate the athletic footwear and apparel business.

Despite a lack of experience in the sport-equipment business, Mr. Heckmann impressed analysts with his track record at U.S. Filter Corp., where he oversaw the acquisition of 260 companies in the 1990s, eventually selling the water-filtration concern to Vivendi SA in 1999 for $6.2 billion.

"You don't drive growth from [cutting] cost, you do it from revenue synergies," Mr. Heckmann said. For this deal, that means using Volkl's distribution channels in Europe to push a wide variety of K2 products and Marmot apparel into stores.

The sporting-goods industry has been on a consolidation kick in recent years, with big retailers like Sports Authority Inc. merging with Gart Sports Co. in August 2003 and manufacturers such as Atlanta-based Russell Corp. and Reebok recently purchasing equipment companies.

K2's recent acquisitions helped sales jump 23% to $718 million in 2003, compared with $582 million the year earlier. The company posted net income of $11 million, or 44 cents a share, in 2003, compared with $12 million, or 67 cents a share, a year earlier.

K2 shares were up 17 cents, or 1.1%, at $15.20 as of 4 p.m. in New York Stock Exchange composite trading yesterday.

---

Shopping Spree

Some of K2's acquisitions since October 2002

-- Rawlings Sporting Goods (baseballequipment company) -- Worth Inc. (softball-equipment company) -- Brass Eagle (paintball equipment) -- Fotoball USA (entertainment and sports marketer) -- Worr Game Products (paintball equipment)
post #3 of 25
A few observations:

- People who thought the tide was turning against ski-binding integrated "systems" need to revise their thinking. Look for K2 and Volkl both to go to the Volkl/Marker system and to "tighten" it, a la Atomic.

- I suspect they'll clarify the position of Volkl as their high-end/expensive/made in Germany (mostly)/"traditional"/older/racing brand, with K2 as the more value-oriented/made in China/hip/"new school"/younger/park and "freeriding" brand. I wouldn't be surprised to see them do the same thing with Marker, i.e. brand some models as K2.

- Look for lots more K2 (Ride, Morrow, etc.) products in Europe. They may rebrand some stuff as Volkl (at least while anti-US sentiment is relatively high), but I wouldn't be surprised if they try to establish K2 and their other US brands as young and hip in Europe.

- If you want to buy any Marmot clothes in the future, get used to having them say K2, Volkl, Marker, Ride or Morrow on the label.

- The other shoe (or boot) to fall is Tecnica/Nordica/Dolomite. They have (or did have) some distribution and ownership ties with Volkl and Marker.

- The brands that have so far been left out of the consolidation into (basically) Salomon/Adidas, Atomic/Amer, Rossignol and K2 will probably either fade into being expensive niche products, get acquired, or vanish. Elan is an example.
post #4 of 25
Quote:
Originally Posted by boredtoo
While K2 started out making winter-sports gear....
This is somewhat misleading ... though the name of the company is "K2," it's really the company that Mr. Heckman started, and that acquired K2 and then changed its name. It is mostly not a winter sports company, though this acquisition increases the "winter" piece significantly.
post #5 of 25
New ski company!!!!! here Skip to p. 3/4/5
post #6 of 25
Actually you are all wrong. K2 Corp, the international publicly traded holding company bought these brands to grow them all individually. All brands, K2, Volkl, Marker and Marmot, are going to be kept seperate. There will be no change as you know it. K2 is looking to expand distrobution in Europe and around the with K2 and Marmot through existing channels. K2 now has nill in the rest of the world besides the US.

Also K2, Marker and Volkl are the dominate brands in skiing now, and having the ability to make financial dessisions together is better for them both. The main idea is to join forces to get rid of Salomon/Adidas and Rossignol from the world markets.
post #7 of 25
post #8 of 25
Volkl makes tennis racquets; does anyone know how this affects that?
post #9 of 25
Quote:
Originally Posted by segbrown
Volkl makes tennis racquets; does anyone know how this affects that?
K2 is not acquiring the tennis racquet business. I'm not sure where it's going, but K2 didn't want it.
post #10 of 25
"....Rossignol and K2 will probably either fade into being expensive niche products, get acquired, or vanish."

Rossi already owns Lange, Look and Dynastar ... so why would Rossi fade away?
post #11 of 25
SkiNut, I think you are misreading what was being said...

The brands that have so far been left out of the consolidation will probably either fade into being expensive niche products, get acquired, or vanish. Elan is an example.

The consolidated brands being (basically): Salomon/Adidas, Atomic/Amer, Rossignol and K2.

Does this make more sense?
post #12 of 25
You guys are fun.
post #13 of 25
And did you see what SkiPress reported about the future for Marker bindings?

"Marker bindings are currently manufactured for a relatively low cost in the Czech Republic, but could be made at an even lower cost at one of K2’s factories in Asia."

I'll stick with my Look bindings.
post #14 of 25
Quote:
Originally Posted by SkiNut
"Rossi already owns Lange, Look and Dynastar ...
Don't forget that the bought up Geez a few years ago............
post #15 of 25
Rossi bought Geze, swiped their binding toe design and killed off the brand probably because of the reputation of 'Cheesy Gezes'.
post #16 of 25
Quote:
Originally Posted by SkiNut
And did you see what SkiPress reported about the future for Marker bindings?

"Marker bindings are currently manufactured for a relatively low cost in the Czech Republic, but could be made at an even lower cost at one of K2’s factories in Asia."

I'll stick with my Look bindings.
The smart move (it seems to me) would be to produce a line of cosmetically-different bindings, based on Marker designs, in China, and brand them "K2." That way, you preserve the perceived value (and high margins) associated with the Marker brand.

I think (though I could be wrong) that only some of Marker's production is in the Czech Republic now. Of course, the Czech Republic is hardly a third-world country ... it's even officially part of Europe. While it may be cheaper to produce bindings, or parts of bindings, there, I don't think there's any reason to suppose that their quality is any lower than if they were produced in a German factory.

For that matter, many say the same about China, though there you do get into some stickier political/human-rights questions. If you're able to go through life in a reasonably efficient way while avoiding owning any Chinese-made products ... well, you certainly must be determined.

If you're pursuing a "buy domestic" agenda, I don't see why you'd prefer German-made goods over Czech-made ones ... unless, of course, you're actually in Germany. If you're in the US, I guess most would probably rate the Czechs a better ally than Germany lately, though if you start picking ski bindings on that basis you'll quickly find yourself wandering around in a politco-ethical fog.
post #17 of 25
Quote:
Originally Posted by sjjohnston
A few observations:

- People who thought the tide was turning against ski-binding integrated "systems" need to revise their thinking. Look for K2 and Volkl both to go to the Volkl/Marker system and to "tighten" it, a la Atomic.
This is the real difficulty with integrated systems. Because the current K2/Marker system is incompatible with the Volkl/Marker system, if they changed K2 over to the Volkl system or vice versa, then anyone who currently has the old system goes to replace their skis, they will find their bindings will not fit on any skis. At least with systems like Pilot you should be able to transfer your old pilot bindings to your new pilot skis when you wear the skis out, assuming the next time you buy skis you want to go for Salomon again.

There are a lot of ski/binding alliances which do not rely on joint ownership so I don't see how this will change anything. Companies like Dynastar/Look and Atomic are dropping the pre-drilled plates on their skis, not because of a change of ownership but because there are a lot of people out there who have their own preferences about what bindings they want to use. Last year vitrually all the Volkl 7:24 Pro in NZ were integrated, this year there are shops which have only the flat version.

But it doesn't really make a difference to me because all the skis I am interested in are flat anyway.
post #18 of 25
Quote:
Originally Posted by kiwiski
... if they changed K2 over to the Volkl system or vice versa,...
I think it's likely that they'll change K2 over to the Volkl system, given that Heckman referred to it as the best system in the industry. Not instantaneously, but before long.

Quote:
... I don't see how this will change anything ...


K2 is touting more integration to investors as a benefit of the acquisition.

It's somewhat different from the situation with other companies (e.g. Atomic) in that Marker is the most-preferred brand of binding to start with. It's only a difference of degree, but it's still a difference.
post #19 of 25
Quote:
Originally Posted by sjjohnston
The smart move (it seems to me) would be to produce a line of cosmetically-different bindings, based on Marker designs, in China, and brand them "K2." That way, you preserve the perceived value (and high margins) associated with the Marker brand.
Last season over in Europe, there were K2 bindings, although they were just re-badged Markers
post #20 of 25
I hope that K2 doesn't mess up the Volkl race program. They managed to completely neglect/lose the momentum generated by Phil and Steve Mahre in the 80's.

More recently, Bode used a pair of off-the-shelf shaped K2 Fours to win the Junior Olympics when no other racers were on shaped technology. A good race development department and marketing should have been able to capitalize on that and dominate the market. Instead, they became almost a non-player in the race room as other manufacturers took the technology and ran with it. They did become a heavy hitter for awhile in the recreational market with that series of skis, however.
post #21 of 25
well well well, you all are correct, but are all wrong anyway.

Everything as you know it will stay in place. Both brands are hot in their respective areas. you will not see any mixing of systems, products or design. Production will remain the same. k2 in china, volkl in germany. marketed the same, sold the same. THIS IS TRUE.

marker's product is made in the checz, ALL OF IT and this will also remain for the meanwhile. The only thing that will change is in the long term when these two companies will be able to combine resources financially to produce lower end skis( like $199 to $299 skis that k2 and Volkl currently make, cheaper to compete with salomon and rossignol at those prices.

Talk about a rumor mill.
post #22 of 25
Wow ! Finally some body in the know. Front4 is right on the money, maybe even an employee of one of those companies.

You guys are a mill that's for sure.
post #23 of 25
Sounds to me like K2 is raking it in after having shifted their production to China and now is looking for someplace to put their profits!
post #24 of 25
"Volkl makes tennis racquets; does anyone know how this affects that?"

The tennis division remains under the current ownership - distribution and sales in the US will remain the same.
post #25 of 25
Hi all...New guy here. Long time 'lurker'...

Fit/Fix guy - There's at least 3 posters in this thread that actually work for one or more of the companies involved.

The truth is out there.
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