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Baseball Gives Go-Ahead for K2-Rawlings Deal

Bid was dependent on contract with the league. Shareholders will vote on the merger this week.

March 25, 2003|Jerry Hirsch | Times Staff Writer

Major League Baseball and K2 Inc. have reached a licensing agreement that paves the way for the Los Angeles ski and fishing gear company to acquire the century-old Rawlings Sporting Goods Co. this week.

Rawlings has the exclusive right to manufacture and market the baseballs used in the top professional league. The contract came up for review when K2 agreed in December to buy the Fenton, Mo.-based baseball equipment company.

Sources familiar with the issue said the parties had been dickering over the price of transferring the license to K2, a dispute that could have scuttled the acquisition.

K2 Chief Executive Richard Heckmann said Monday that all of the issues had been resolved and that barring "some unanticipated hitch," he expects the acquisition to close Wednesday, when shareholders of both companies will vote on the deal.

Heckmann declined to talk about the terms of the new agreement with Major League Baseball.

Heckmann said he had been prepared to back out of the deal if an agreement with MLB, and a second licensing deal with another unnamed Rawlings partner, could not be reached.

Rawlings sells about $100 million a year in baseball equipment, and ball sales are a small portion of total revenue.

The company sells an additional $75 million annually in football, basketball and other team-sport equipment.

Heckmann said he sees the Rawlings purchase as the first step in building K2 into a Fortune 500-sized sporting goods company. K2 posted $582 million in annual sales last year.

"We want to get this Rawlings transaction done and then we can start looking for other opportunities," Heckmann said.

As of Monday, the stock acquisition is valued at about $73 million plus K2's assumption of about $30 million in Rawlings debt.

K2 shares fell 13 cents to $8.12 on the New York Stock Exchange. Rawlings was unchanged at $8.20 on Nasdaq.

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