Derby successfully sold its Gazelle business two weeks ago and the proceeds from this will go to paying down Derby's debt and paying a dividend to Derby's bondholders, who, in effect, own the company.
Now it's up to Derby's VC overlords Thayer and Perseus, and the 'restricted group' of top bondholders, to see who will take on the reigns for Derby sans Gazelle.
A sports investment fund is said to be interested in parts of the loss-making Derby empire, but only Finden-Crofts is aiming to raise finance to MBO the whole group.
Finden-Crofts told bikebiz.co.uk today that his MBO is still looking by far the strongest candidate and all the nuts and bolts of a deal will be in place within two months.
"We're right in the middle of the MBO deal right now. It's the one to come up with the most cash who will win," he said.
The new look Derby would be privately-owned (ie no more life-in-a-goldfish-bowl SEC filings) and would issue preference shares to investors, rather than ordinary shares.
The mistakes of the past would be put behind Derby. One US-based Derby bondholder told bikebiz.co.uk that Gary Matthews' management of Derby throughout 1999 and 2000 - including the disastrous sale of Sturmey Archer - should be "a model taught in every business school in the world...on how not to blow up a company."
Finden-Crofts, on the other hand, is now seen by bondholders as an experienced industry leader who should have been allowed much more of a hands-on role in the two short years of Matthews tenure at the helm of one of the biggest bike groups in the world.
Here's the press release announcing the sale of Gazelle
NOTTINGHAM, U.K. - The Derby Cycle Corporation (the “Company”) announced today that its subsidiary, Derby Nederland B.V., had entered into a definitive sale and purchase agreement for the sale of all issued and outstanding shares of its subsidiary, Koninklijke Gazelle B.V. (“Gazelle”), to Gazelle Holding B.V., a company controlled by Gilde Investment Management B.V. located in The Netherlands. Pursuant to the agreement, the purchase price is EUR 142.5 million in cash, less EUR 11.9 million of debt and taxes outstanding of Gazelle as of June 1, 2001, and subject to certain adjustments based on Gazelle’s balance sheet as of June 1, 2001. EUR 10.0 million of the purchase price will be placed in escrow, to be released to the Company upon the determination of certain contingencies.
The sale of Gazelle pursuant to the agreement is subject to approval by the Dutch competition authority (Nederlandse Mededingingsautoriteit or NMa). The Company anticipates that the necessary approval will be obtained and that the sale will be completed on or about 30 days from the date of the agreement; however, no assurances can be given that the sale will be consummated.
Upon completion of the sale, the Company intends that the sale proceeds will be used primarily to repay or collateralize all of the outstanding amounts under its senior secured revolving credit facility (the “Revolving Credit Facility”), to make past due interest payments on its $100 million principal amount of 10% senior notes (the “Dollar Senior Notes”) and its DM110 million principal amount of 9 3/8% senior notes (the “DM Senior Notes” and collectively with the Dollar Senior Notes, the “Senior Notes”), to pay fees and taxes resulting from the sale and to partially repurchase the Senior Notes. The Company also intends to retain up to the equivalent of $2.5 million of the sale proceeds for working capital and general corporate purposes.
The proposed use of the sale proceeds by the Company is contingent upon the Company’s entry into amendments to the indentures governing the Senior Notes. These amendments require the consent of holders of at least a majority in aggregate principal amount of the outstanding Dollar Senior Notes and DM Senior Notes. The Company has reached agreement on the form of such amendments with the committee representing a majority in aggregate principal amount of the outstanding Dollar Senior Notes and DM Senior Notes and expects to obtain the necessary consents.