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INTERBIKE: Derby Cycle Corp bites the dust; 'Raleigh Cycle Ltd.' takes over - BikeBiz

INTERBIKE: Derby Cycle Corp bites the dust; 'Raleigh Cycle Ltd.' takes over

bikebiz.co.uk this morning helped to steet Alan Finden-Crofts to the Derby Cycle Corporation stand as he entered Interbike. As he got closer to the stand, Derby's overseas agents greeted him warmly, and he was extremely well received by Derby execs and staffers: they've now got jobs they can rely on. Had Trek, Huffy or Pacific successfully bid for DCC, Derby jobs around the world may have evaporated. So, what are AFC's plans now that he's the president and CEO of the new owner of Raleigh and Diamondback?
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It's a fresh start. Derby's bondholders have been paid off and the new company is owned by a combination of Derby's former investors, Derby global MDs and Alan Finden-Crofts himself.

The new company has no official name as yet but it's likely to be called Raleigh Cycle Ltd, or similar. The US operation would be called Raleigh America and so on for the other interantional divisions.

Cycle Bid Co, the MBO vehicle, bid $23m for Derby and bondholders agreed to this figure after having bumped the total up $3 million in an auction that Finden-Crofts said was "just like buying a pig at a market."

The bondholders lost perhaps $50m, despite the $23m final deal and the previous proceeds from the the sale of Gazelle. The shareholders lost their stakes.

Including debts and liabilities, the full purchase price for DCC is $75m. However, the company has $100m in assets and one US industry observer said Finden-Crofts got a "phenomenal deal".

Huffy made a last minute attempt to enter the bidding process, despite having missed the bidding deadline.

The 'sale' to the Cycle Bid Co. should have gone through last Friday morning but it didn't finally get ratified until late on Friday evening, thanks to the Huffy spoiler bid.

The last minute expression of interest in Derby came after Huffy was still smarting from being beat to Schwinn/GT by mass-market operator Pacific. Huffy was only interested in the US part of Derby (it wanted to bid $8m) but this would have meant the liquidation of the rest of the Derby empire, including Raleigh in the UK.

Pacific had also been semi-interested in making a bid for Derby but, according to Pacific's CEO Chris Horning, this interest amounted to little more than an exploratory phone call with Finden-Crofts.

Aside from Cycle Bid Co., Trek had been the only serious contender for grabbing Derby but the company decided not to progress its interest. However, after doing a great deal of expensive due diligence - and top execs paying visits to its international operations, including Raleigh in the UK - Finden-Crofts said Trek is now extremely well-informed about (a) Derby and (b) the global bike market.

Had any of the other players bought Derby, it would have been likely that the brands would have been floated off and the physical operations closed down. Raleigh UK would not have moved to a new factory, it would have been merely a 'badge'.

The $23m paid for Derby may seem like a bargain - especially when compared to the $86m Pacific just paid for Schwinn/GT and the fact Derby was 'sold' for $179m just a few years ago - but Finden-Crofts told bikebiz.co.uk that Derby without Gazelle was worth a lot less because the remaining parts of the Derby empire were big loss makers.

The new company is not totally in the clear just yet, the Chapter 11 bankruptcy judge still has to OK the deal by this Tuesday, but it's highly unlikely any further serious bids would be tabled within the next few days.

The company ownership split looks like this. There are an equal number of preference and ordinary shares. Alan Finden-Crofts owns 84 percent of the ordinary (vote bearing) shares. 16 percent of the preference shares (non voting) and 16 percent of the ordinary shares are owned by former Derby investors Perseus, Fred Malek of Thayer and the Soros fund. Seven of Derby's top execs around the world own two percent of the shares each, although not Raleigh MD Philip Darnton.

John Schwieters of Perseus is to become non-executive chairman of the new company.

Working capital will be provided by banks in each of the respective countries the former Derby operated in, bringing financial flexibility, a Godsend after the strictures imposed on Derby by its former, global phalanx of bankers, led by Chase Manhattan.

Finden-Crofts is upbeat about prospects for the new company:

"We're going to be a force again. There's no reason that this business shouldn't wash its face. It's going to be hard work, confidence will need to be rebuilt, but we'll get there."

CAPTIONS:

TOP: The Derby Cycle Corporation is still the Derby Cycle Corporation at Interbike, but the entity no longer exists. It'll soon metamorphose into something along the lines of 'Raleigh Cycle Ltd.'...

BOTTOM: Derby's troubles led to the former CEO, Gary Matthews, selling Sturmey Archer for just thirty pounds. Sturmey Archer lives on though, albeit as a Taiwanese company. But there's still one Brit left. Er, Alan Clarke of Holland, seen here at Las Vegas.

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