After reporting combined results with Sport Supply Group, Collegiate Pacific has had to back-pedal, announcing last week that the companies have mutually agreed to terminate their merger agreement. This announcement comes on the heels of a pair of lawsuits filed in early October that claim the consideration to be paid to shareholders of SSG is “inadequate.” In conjunction with the announcement of the termination of the merger, Collegiate Pacific also announced that it had purchased additional shares of SSG.

Collegiate Pacific purchased an additional 1.66 million, or 19%, of the outstanding shares of Sport Supply Group for approximately $9.2 million in cash — or $5.55 per share — of SSPY common stock from an institutional holder. The additional shares brings BOO’s stake in SSG to approximately 72%. Purchasing the stock at $5.55 represented a 22% discount to the $6.74 paid to Emerson Radio in July and proposed in the Merger Agreement. Collegiate Pacific anticipates it will incur a one-time charge related to the termination of the Merger Agreement of approximately $500,000 in the company’s second fiscal quarter.

The lawsuits against the two companies, were filed by two shareholders of Sport Supply Group on October 5, 2005. Martin Kleinbart and William Stahl each filed a separate lawsuit against Collegiate Pacific, SSG and the board of directors of SSG, including the company’s chairman and CEO, Michael J. Blumenfeld.

The plaintiffs filed the lawsuits as a class action on behalf of the public shareholders of SSG in connection with the pending Agreement and Plan of Merger. The lawsuit alleges the consideration to be paid to the public shareholders of SSG is inadequate and that the defendants breached certain fiduciary duties owed to the SSG public shareholders.


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