Cannondale bought by its chapter 11 'stalking horse'

An affiliate of Pegasus Partners II, L.P., the existing de facto 'owner' of Cannondale after it pumped in loans last year, has successfully beat off other bidders to secure the bicycle and motorcycle assets of Cannondale Corporation.
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Separate auctions for the bicycle and motorsports divisions were held yesterday at Cannondale's Bethel, Connecticut, headquarters.

Cannondale had filed a voluntary petition for chapter 11 protection in the US Bankruptcy Court in the District of Connecticut on January 29th.

After a "vigorous auction", the assets of Cannondale's bicycle and motorsports divisions are to be purchased by an affiliate of Pegasus Partners II, L.P., subject to the approval of the Bankruptcy Court.

The terms of the winning bids were not disclosed.

Cannondale’s largest secured creditor, Pegasus had agreed in late January to act as the “stalking horse” bidder in the sale. At that time, Pegasus stated "its commitment to working with current management and operating the bicycle business as a going concern."

Pegasus has already indicated that it does not intend to operate the motorsports division.

Cannondale’s founder Joe Montgomery was pleased with the outcome of the auction:

“This is a huge step toward successfully realizing our three key objectives: ensuring a quick emergence from chapter 11, restoring focus and adding resources to the bike division so it can continue to thrive and prosper, and preserving our employees’ jobs in Connecticut and Pennsylvania.”

Montgomery was also eager to thank those who stayed loyal to Cannondale:

“Our dealers, suppliers, customers and employees have really stood by us, and we’re extremely grateful,” said Montgomery.

Cannondale's senior management team - led by Dan Alloway and Scott Montgomery - remains unchanged.

Alloway voiced his eagerness for Cannondale to move forward as it emerges from bankruptcy:

"The successful auction and the speedy resolution now enables us to focus on bicycle delivery and service as we enter the busy spring selling season," said Alloway, Cannondale's Vice President of Sales and European Operations.

Scott Montgomery, Cannondale’s Vice President of Marketing, said:

“We’re happy to be able to concentrate on the bike business again, and we’re feeling great about the future with Pegasus as our partner. We’re producing and shipping 2003 product every day, and the 2004 line is loaded with new innovations.”

David Uri, a Partner at Pegasus explained its bid for Cannondale:

“Cannondale is one of the world’s premium bicycle brands. The fact that the bike division has remained profitable despite the distraction and costs of its now closed motorsports business clearly demonstrates the strength of the brand. Our job now is to let Cannondale concentrate on what Cannondale does best – designing, manufacturing and marketing lightweight, high-performance bicycles for the specialty retail market.”

It is expected that Cannondale will officially emerge from chapter 11 within the next several weeks, following the Court’s anticipated approval of yesterday’s auction and the subsequent closing of the sale.

Elizabeth Fox of Fox Racing Shox, chairperson of the Official Committee of Unsecured Creditors, stated that in connection with the auction process, the Committee reached a favorable agreement with Pegasus and fully supports the sale to Pegasus. Fox said that she hoped this agreement would pave the way for the continuation of the supportive relationship between Cannondale and its vendors.

Pegasus Capital Advisors, L.P., based in Greenwich, Connecticut, is a private equity investment firm with approximately $800 million under management.

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