Dorel Industries has entered into a definitive agreement to sell Dorel Sports to Pon Holdings for $810 million in cash.
Dorel said it expects to use the net proceeds from the sale of approximately $735 million (subject to closing adjustments) to reduce indebtedness, return capital to shareholders and for general corporate purposes. The sale of Dorel Sports is expected to close before the end of the first quarter of 2022. Dorel intends to announce specific details regarding the use of the net proceeds from the sale at the time of closing.
The sale has been unanimously approved by Dorel’s board of directors and is subject to customary closing conditions, including receipt of applicable regulatory approvals and the absence of any material adverse changes with respect to Dorel Sports until closing. The sale is not subject to any financing conditions. The transaction will consist of the sale by Dorel of 100% of the shares of its indirect wholly-owned subsidiary companies comprising Dorel Sports as well as certain related assets. Under applicable corporate law, the transaction is not subject to approval by Dorel’s shareholders.
Martin Schwartz, Dorel president and CEO, said: “Acting on feedback from our shareholders, Dorel embarked on a thorough review of strategic alternatives earlier this year. Our objective has consistently been to create value for our shareholders. The divestiture of Dorel Sports represents a unique opportunity to unlock value by capitalising on strong demand for scaled assets in the bicycle segment.
“On behalf of the board of directors, I extend my sincere thanks to the entire Dorel Sports team for their outstanding efforts over the years. Dorel Sports has been an important part of our organisation since 2004 and we are very proud of the global success it has achieved. While making the decision to sell Dorel Sports has been difficult, we are confident that this transaction represents full value for Dorel shareholders.”
The definitive sale agreement with Pon Holdings follows a strategic review and a competitive sales process. Dorel believes that the 100% cash transaction will crystalise significant proceeds and will unlock the full value of the Dorel Sports business for Dorel shareholders. Dorel further believes that the interest in Dorel Sports expressed during the robust sales process reflects the work by the Dorel Sports team to improve profitability, gain new customers and enhance the operating structure and cost profile of Dorel Sports.
The agreement to sell Dorel Sports marks an ‘exciting new chapter’ for Dorel. Dorel believes that the sale of Dorel Sports will strengthen Dorel’s balance sheet, allow Dorel to focus on generating profits from its remaining businesses, substantially accelerate Dorel’s ability to deleverage the business and position Dorel to grow its Home and Juvenile businesses both organically and through value-accretive tuck-in acquisitions.
Going forward, Dorel said it will focus its energy and resources on continuing to deliver value to shareholders by accelerating growth and driving margin expansion in its Home and Juvenile businesses. With a stronger balance sheet after the close of this transaction, an industry-leading portfolio of brands and products, strong customer demand and growing end-markets, Dorel believes it will continue to compete from a position of strength.
Schwartz added: “Dorel is committed to taking a disciplined approach to value creation as it sees significant upside in both its Home and Juvenile businesses and will look to replicate the success it has achieved with Dorel Sports to create additional value for shareholders. To be clear, at this time, we are not pursuing a monetisation of our Home and Juvenile segments. We see opportunities to drive top-line growth as well as initiatives to reduce our overall cost structure to improve our cash-flow generation at both segments.
“We have the right management and strategy in place at both businesses to drive strong results in the medium-term. We will re-assess our strategy as required. While we may retain some capital from the sale of Dorel Sports for potential reinvestment opportunities, we currently intend to reduce financial leverage and return capital to shareholders.”
Janus Smalbraak, CEO of Pon Holdings, said: “[Yesterday’s] step is a milestone in the creation of a world-leading bike company with a variety of quality brands. With the acquisition of Gazelle in 2012, we launched a strategy that step by step led us to the 1.5 billion in revenue bike group that we are today, with great comfort and performance bicycle brands, of which 70% electric. As a result of this strategy.
“We have now reached a highlight with the acquisition of Dorel Sports. They have a rich history with their iconic bike brands all with an impressive heritage. Schwinn is an institute in the US. Caloi the pride of Brazil. And Cannondale is a truly global brand with an excellent reputation. Dorel Sports really is complementary to Pon.Bike and that’s why this is such a logical step.
“Together we can further cater the ever-growing demand for quality and electric bikes, whether it’s for urban use, leisure or sports. Biking is not only healthy, it also plays a critical role in fighting inner-city congestion. It’s one of the most sustainable ways of transport. We are determined to make bikes a powerful part of mobility. We look forward to working together with the Dorel Sports people all over the world and welcome them to the Pon family.”