Consumer goods maker Jarden Corp. said Wednesday that it would acquire K2 Inc. for $765 million to expand its line of outdoor products.
Rye, N.Y.-based Jarden's line of consumer products includes items as varied as playing cards, plastic cutlery, camping gear and coffee makers. The company will pay $15.50 in cash and stock for each K2 share, which represents a 23% premium to K2's closing price Tuesday.
Among Carlsbad, Calif.-based K2's sporting goods lines are K2 skis, Shakespeare and Penn fishing tackle and Rawlings baseball equipment.
The deal reflects Jarden's interest in acquisitions in the outdoor products segment, Chief Executive Martin Franklin said. Earlier this month Jarden added Pure Fishing Inc. to its outdoor products portfolio that includes Coleman and Campingaz.
Buying K2 "was all part of a wider strategy on how we want to develop Jarden's outdoor solutions segment," Franklin said.
The deal, which could close early in the third quarter, is expected to boost the company's earnings and yield cost savings of $25 million to $50 million over the next two years, Franklin said.
Jarden, which makes Mr. Coffee, Sunbeam and Crock-Pot kitchen appliances, has grown through such acquisitions.
As a result of the K2 and Pure Fishing acquisitions, Jarden will be able to touch earnings of $2.98 a share by the end of 2007 and will aim to earn more than $5 a share in the next three to four years, Franklin said. The company will use K2's experience to develop an apparel line to add to Coleman's well-known line of outdoors equipment, he said.
K2, like Pure Fishing, is a good fit for Jarden, CIBC World Markets analyst Joseph Altobello wrote in a note. "Over time, we expect this to translate into meaningful cost and revenue synergies, which should improve the purchase price," he wrote.
Jarden will pay $10.85 in cash and 0.1086 Jarden share for each K2 share. Including K2 debt being assumed by Jarden, the deal is worth $1.2 billion.
Shares of K2 rose $2.52, or 20%, to $15.10. Jarden shares sank $1.52, or 3.5%, to $41.58.