Two interesting developments in the K2 / Rawlings acquisition deal last week. On Monday, K2 Chairman and CEO Richard Heckmann confirmed that Rawlings Major League Baseball contract is indeed the stumbling block in the acquisition talks between the two companies.
Heckman said he would abandon K2’s proposed $74 million purchase of Rawlings Sporting Goods Inc. if an agreement could not be reached to transfer Rawlings commercial contract with Major League Baseball. K2 is engaged in ongoing talks with the league to resolve the dispute.
“They (Major League Baseball) are using this change of control consent as a lever and were negotiating at this point,” Heckmann said. “The negotiations got pretty tough. But If we dont get the deal that we want from baseball, were not going to close this transaction.”
Heckmann’s comments came after an SEC filing by K2 suggesting that it would not close the deal unless it could reach agreements to transfer certain contracts Rawlings holds with commercial partners.
The CEO had made remarks the previous Thursday in private conversations with certain members of the financial committee. The company was required to furnish the information under Regulation FD.
“I have to say, this is a serious issue,” Heckmann had said regarding to “certain” amendments they were seeking. “Without these consents, this deal does not go through. I will not close without them.”
In Rawlings November 10-K filing, RAWL had indicated that, “The loss of the Major League Baseball exclusive supplier contract could have a material adverse effect on the Company’s sales”.
In another story first released by Reuters last week, it appears that Rawlings largest investor Daniel Gilbert dumped many of his shares the day before the MLB stumbling block was first revealed on March 13th.
The sale by Rawlings shareholder Daniel Gilbert confirmed earlier reports that he intended to unload his entire investment in the company.
According to filings with the Securities and Exchange Commission, Gilbert sold 938,500 shares of Rawlings stock on March 12, 2003 at prices between $7.85 and $8.21 for a total of $7.4 million, cutting his stake in the company to 3.3% from 14.9%.
Gilbert had initially fought against the K2 acquisition and even made several cash bids to buy all outstanding shares of Rawlings. Rawlings management announced in December that it had signed a deal with K2 and Gilbert announced his support for the deal in February.
>>> To borrow a conspiracy-theory phrase – What did he know and when did he know it???