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K2 to Buy Brunswick's Outdoors Brands

Sporting goods: Company hopes to expand into new sectors of market with the $200-million acqiusition.

October 14, 2000|ABIGAIL GOLDMAN | TIMES STAFF WRITER

Los Angeles-based K2 Inc. already owns a nice slice of the youth sporting goods market--making in-line skates, skis and snowboards. Now the company wants to broaden its appeal among the field-and-stream set.

K2 said Friday it intends to give Brunswick Corp. $200 million in cash and securities in exchange for Zebco fishing tackle, MotorGuide trolling engines, Hoppe's hunting accessories and Igloo cooler products.

"These acquisitions are highly strategic to our goal to become the world's leading sporting goods equipment company," K2's president and chief executive, Richard Rodstein, said in a news release. "Additionally, as with all of our brand names, these well-known brands hold the potential to serve as platforms for growth beyond their current product offerings."

As just one example, analysts said, the Igloo cooler brand gives K2 access to a much wider range of retail outlets.

With $375 million in revenue during the previous 12 months, the acquired brands probably will propel K2 into the billion-dollar revenue club. In 1999, K2 reported sales of $635 million.

Brunswick, based in Lake Forest, Ill., said it will take a third-quarter charge of $150 million to unload the noncore businesses and focus on its namesake bowling alleys, Mercury outboard motors and Sea Ray yachts. The leading seller of boats and boat engines, Brunswick reported 1999 sales of $3.8 billion, of which about $3 billion came from the company's marine businesses.

The company is also hoping to sell off its bicycle and European fishing equipment business. Brunswick said Friday it has completed the sale of its sleeping-bag business to closely held Exxel Outdoors Inc. of Laredo, Texas, and the sale of its tent and camping businesses to Avid Outdoor in Olathe, Kan. Sale prices weren't disclosed.

So while Brunswick, which began in 1845 as a billiards and carriage company, scales back, is K2 stepping in to repeat the errors?

Hayley Kissel, leisure industry analyst for Merrill Lynch in New York, titled her report on the deal "One Man's Trash Is Another Man's Treasure."

"It's one of those deals that works for both parties," Kissel said. "It has the potential to jump-start K2 and help Brunswick with its new religion, focusing on its core business."

K2, the nation's No. 1 ski maker, actually has been fishing since 1980, when it bought leading fishing equipment maker Shakespeare fishing tackle.

Water sports, however, have figured into the company's product lines since it began in 1946 as Anthony's Pools. That company bought the K2 ski business in 1985 and the Stearns line of personal flotation devices and wetsuits in 1988.

From there, K2 flexed its sporting goods muscle to horn in on the snowboard and in-line skate markets in 1994, businesses that until now had been growing concerns.

With those businesses slowing, K2 has been eager to expand its more grown-up lines, such as fishing supplies.

At the same time, Brunswick has been working to shed businesses it gained in the mid 1990s. With a new chief executive, the company is returning its focus to its strong core, boating, rather than be distracted by newer sideline businesses,Kissel said.

K2 shares closed up $1 on Friday at $9.38 on the New York Stock Exchange. Brunswick shares were up 81 cents to $17.50, also on the NYSE.

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