The first bump in the road for the planned acquisition of K2 by Jarden Corporation is a class-action lawsuit filed by the Steamfitters Local 449 Pension and Retirement Security Fund of Pittsburgh against K2 and its board of directors. The lawsuit, filed in San Diego Superior Court, alleges that K2 and its board of directors approved the deal on April 24 at an unfair and inadequate price, among other charges. K2 reacted by saying that the lawsuit is without merit and that it intends to respond accordingly.

Jarden’s board has agreed to a payment of $1.2 billion in cash and shares for K2, which had sales of $1.4 billion in 2006 through its 22 different sporting goods brands. The combination of the sports equipment sales of the two groups, which include Coleman, Campingaz and the recently acquired Pure Fishing group, should lead to sports equipment sales that would have reached $2,296 million on a pro forma basis in 2006, creating the second-largest sports equipment supplier after Amer Sports at $2,330 million.

Jarden plans to issue about 5.6 million new shares in the transaction, while assuming $315 million worth of K2’s debt and contracting $500-600 million in new debt. The new owners feel that they will be able to increase K2’s operating margin before amortization by 2-3 percentage points through a number of measures.

Coleman, whose camping business is counter-seasonal to K2’s ski business, is already in the process of consolidating seven distribution centers in Europe into three. The production of some Coleman products may be moved to K2’s large and well-oiled manufacturing facilities in China. Both K2 and Pure Fishing may benefit from Coleman’s large distribution apparatus in Japan. Other synergetic measures will be taken by Gary Kiedaisch, who will continue to be in charge of Jarden’s expanded outdoor solutions segment. A seasoned executive, he has run Head, Bollé and Nike Bauer Hockey.

As previously reported, K2’s total sales in the 1st quarter grew by 7.1 percent to $372.7 million, reflecting stronger sales from the company’s “team sports” and “marine and outdoor” divisions. The gross margin improved by 0.9 percentage points to 33.2 percent, while net income climbed by 30.9 percent to $4.8 million.

Adding to the figures already published in the last issue, K2’s marine & outdoor division, which includes the Shakespeare and Penn fishing brands, as well as Stearns and Sevylor, reported sales growth of 15.5 percent to $142.2 million, thanks in part to the acquisitions of Sevylor and Penn. The division’s operating income fell by 3.8 percent to $15.3 million, mainly due to expenses associated with the recent acquisitions. Turnover in the team sports segment was up by 1.4 percent to $134.4 million thanks to strong sales of paintball products. The segment’s operating income rose by 19.4 percent to $15.4 million, added by its shift of bat production to China from the USA.

The apparel and footwear division reported a sales increase of 9.3 percent to $39.8 million, as increased turnover from Marmot winter outerwear and Ex Officio spring apparel was offset by declines in sales of skateboard shoes and apparel. The operating loss for the division in a seasonally slow quarter narrowed to $1.3 million, as compared to $1.8 million in the year-ago period. Turnover for the “action sports” segment was flat at $56.3 million, as increases for K2 skis and inline skates were offset by declines for Völkl alpine skis and Marker bindings. The division’s operating loss was $10.6 million, compared with $10.7 million, mainly due to a higher gross margin.