• Welcome to AlpineZone, the largest online community of skiers and snowboarders in the Northeast!

    You may have to REGISTER before you can post. Registering is FREE, gets rid of the majority of advertisements, and lets you participate in giveaways and other AlpineZone events!

K2 buys Marker, Volkl and Marmot

Greg

Moderator
Staff member
Moderator
Joined
Jul 1, 2001
Messages
31,154
Points
0
http://www.skiracing.com/industry_report/news_displaySRIR.php/1742/SR_INDUSTRY_REPORT/newsArticles/
K2 buys Marker, Völkl and Marmot
By Seth Masia
June 16, 2004
CARLSBAD, Calif. — K2 Inc. (NYSE:KTO) announced the signing of three definitive acquisition agreements in which Völkl Sports Holding AG, The Marker Group and Marmot Mountain Ltd. would become wholly owned subsidiaries of K2. The transactions, which are subject to regulatory review and other customary conditions, are expected to be completed by mid-July, 2004. K2 indicated that it expects the transactions to be accretive to its earnings in 2004 and subsequent years.

"The Völkl and Marker acquisitions are very significant in that they continue our strategy of building a truly global winter products platform for K2," said Richard Heckmann, K2's chairman and chief executive officer. "The ski business is increasingly driven by a few global players with integrated ski and binding systems, and this transaction will solidify K2's leading position on a global basis. K2, Völkl and Marker are leading authentic brands and together they will constitute the most unique and powerful winter products platform in the industry today. The addition of Völkl and Marker's strong European management team gives us a unique opportunity to combine our significant European operations for the benefit of both customers and employees. Völkl's outstanding heritage of German engineering excellence will be a strong addition to our worldwide product offering in the ski industry as will their superb manufacturing facilities."

Mr. Heckmann continued: "Equally exciting is the Marmot acquisition, which positions K2 with a scaleable platform in the outdoor technical apparel market. One of K2's objectives has been to build a premium technical apparel platform that would complement its reputation for performance products in sporting goods. Combined with the recently announced acquisition of Ex Officio, we are confident that we will be able to successfully grow these businesses and expand K2's presence in technical outdoor apparel. With 35 major brands across many of the major sporting goods markets, the opportunity to combine the technical high-end apparel expertise of Marmot and Ex Officio with K2's leading equipment brands and broad retail distribution will present internal growth possibilities for some time."

Acquisition Overviews
Völkl, established in Germany in 1889, is a leading global manufacturer of premium skis with an average retail price point above $500. It is the No. 1 ski in the U.S. in dollar terms, while K2 is the No. 1 ski in the U.S. in units. Völkl has a highly automated manufacturing facility in Straubing, Germany, which K2 intends to maintain.

Marker, founded in 1952, is a worldwide market leader in ski bindings, with an estimated market share in excess of 40 percent in the U.S. Marker has leveraged the strength of the Marker brand and technology to partner with ski manufacturers, including Völkl and K2, to sell integrated ski and binding systems. This partnership has enabled Völkl to establish itself as the leader in the U.S. in ski system sales, growing from an estimated 3 percent of the U.S. market in the 2000-2001 season to 43 percent in the 2003-2004 season. In addition, in the past season, a significant percentage of K2's skis were sold as integrated systems with Marker bindings.

Völkl and Marker are linked by common ownership. The purchase price for the acquisition is approximately $124 million plus the assumption of seasonal working capital debt. The transaction consideration will consist of a combination of K2 stock, cash and the assumption of debt. On a combined basis, Völkl and Marker generated total sales of $171.9 million (EUR 146.0 million) in the fiscal year ended March 31, 2004.

Marmot, founded in 1971, is a leader in the premium technical outdoor apparel and equipment market. Marmot's product lines include performance jackets, technical rainwear, expedition garments, fleeces, softshells, skiwear outerwear and accessories, gloves, and expedition quality tents, packs and sleeping bags. Retail price points for Marmot's products range from $80 to $400, and sales for 2004 are estimated to be $74 million. Marmot produces skiwear under a license with Marker, which will result in additional synergies for K2. The purchase price is approximately $84 million plus the assumption of debt. The transaction consideration will consist of a combination of K2 stock, cash and the assumption of debt.

K2 plans to finance the acquisitions through a combination of debt and equity.

Outlook for 2004
The Company today also updated guidance for fiscal 2004, and re-confirmed guidance for the second quarter ending June 30, 2004. On a full year basis for fiscal 2004, the Company expects sales of approximately $1.1 billion and basic earnings per share of approximately $0.97, assuming projected average basic shares outstanding of 39.8 million, and diluted earnings per share of approximately $0.86 on projected average diluted shares outstanding of 49.1 million as if the Company's convertible debt were converted into shares. The share count projections for fiscal 2004 include shares that are projected to be issued in the pending acquisitions and related financings. For the quarter ending June 30, 2004, the Company expects sales in the range of $230 million to $240 million and basic earnings per share of approximately $0.18, assuming projected average basic shares outstanding of 34.9 million, and diluted earnings per share of approximately $0.16, assuming projected average diluted shares outstanding of 44.4 million as if the convertible debt were converted into shares.

Bottom line
The move leapfrogs K2 solidly into marketshare leadership in skis and bindings. Marker and Völkl will improve their margins and competitive positions by moving low-end and mid-range production to China. Biggest gainer in this respect should be the Völkl snowboard product.

Marmot gives K2 a $150 million softgoods capability. Expect to see fashion lines under each of K2's hardgood brands. It also opens Völkl's European distribution to K2's five snowboard brands.

In the course of Wednesday morning's conference call, Heckman noted that K2 has acquired the Völkl sales and distribution company in New Hampshire, and will maintain Völkl's distribution through some of the Tecnica organizations in Europe. The purchase does not include Völkl's tennis division, which remains with Tecnica.

Left a bit up in the air is K2's future in the ski boot business. It's easy to imagine K2 manufacturing ski boots in Italy and China, on behalf of its new European distribution partners.
 

riverc0il

New member
Joined
Jul 10, 2001
Messages
13,039
Points
0
Location
Ashland, NH
Website
www.thesnowway.com
NOOOOOOOOOOOOOOOO!!!! this is sad news. i LOVE volkl and think they've run a great company that offers a superior product. i hope the volkl line remains strong and untainted if this merger goes through. nothing against k2, but mergers like this worry me.
 

ChileMass

Active member
Joined
Nov 10, 2003
Messages
2,482
Points
38
Location
East/Central MA
I am guessing this is actually good news for Volkl, in that as the total number of skis sold continues to slide, having a strong corporate parent can only be a good thing for those brands that survive. How'd you like to be Blizzard or come other small brand? K2 has always been a solid member of the ski industry and will likely position Volkl as its flagship product. Further consolidation of the ski manufacturing sector is inevitable as boarding gains in popularity and retail prices continue to rise to unreal levels.
 
Top