Tandem believes Dawes can be made profitable within a year

The acquisition of Dawes by Tandem took place last Tuesday (drat, when I was on holiday!) and the shares used for buying the company from VC owner Grove Industries were admitted to the Alternative Investment Market yesterday.

Paul Vicary of Tandem is taking on the day to day MD responsibilities for Dawes as Pieter van Hengel becomes ex-MD of the company. His is the only job loss, and as is the way in executive life, he has non-compete clauses in his severance deal meaning he won’t be able to work in the cycle trade in the foreseeable future.

Vicary, speaking from a poolside in Spain, told bikebiz.co.uk that the deal took so long to ink because of its complexity. The fact Tandem was about to buy Dawes was the worst kept secret in the UK bike trade for at least four months.

“There was lots of detail to work through in the sale contract with Grove Industries,” said Vicary.

“It wasn’t an easy deal. It’s a jolly good brand and the margins are excellent but the company has been losing money for such a long time. The deal took longer than we liked.”

Here’s the official press release from last week:

TANDEM ACQUIRES DAWES CYCLES

Tandem Group plc (Tandem), the sports and leisure group and a leading

manufacturer and distributor of bicycles in the UK, today announced the

acquisition of the business of Dawes Cycles (Dawes) for an initial

consideration of £231,000 payable by the issue of 4,200,000 Tandem ordinary

shares. Application will be made to admit these shares to AIM. Admission is

expected to take place on 2 July 2001. The recipients of the shares have

agreed not to dispose of the shares for a period of 18 months post completion.

In the year ended 31 October 2000 Dawes had a turnover of £6,702,000 and

made an operating loss of £706,000, including exceptional costs of £350,000.

The initial consideration is equal to 75% of the estimated net assets acquired

on completion. Further consideration will be payable in September 2001 by the

issue of Tandem ordinary shares equal to 100% of the agreed value of net

assets acquired on completion less the amount of the initial consideration.

In addition deferred consideration of £360,000 will be paid in the future,

based on the turnover of certain products, and settled by the issue of Tandem

ordinary shares in due course.

Dawes was established in 1926 and the brand name has strong awareness in the

cycling market and among the general public. Dawes’ reputation was built

originally around its range of classic touring bikes, although the business

now has an extensive product range including trekking, city (including

folding), tandem, sports, hybrid and mountain bikes.

Dawes products are targeted at the upper price ranges for bicycles with the

top tandem model retailing at £1,500. It is particularly strong in the

30-year-old plus market. A small business selling bicycle accessories that

was acquired by Dawes in 1999 will form part of the acquisition.

Mervyn Keene, Tandem Finance Director, said;

"We are delighted to have acquired such a strong brand to add to our existing

bicycle business. We intend to manage the Dawes business independently from

the Group’s Falcon operations, however, the expected synergies from the

acquisition should lead to reductions in costs and an expansion of our

customer base."

This is the third acquisition Tandem has made in the past nine months

following the acquisitions of Pot Black (U.K) Limited and Two Wheel Trading

Limited last September. Discussions are continuing with other sports and

leisure equipment companies that could lead to further acquisitions.