Dorel Sports bought Pon Holdings in a $ 810 million deal

Dorel Industries has offloaded its Dorel Sports division in a $ 810 million cash deal with Pon Holdings.

Marking a coming together of two goliaths in the bike business, the joining of portfolios is yet to be detailed in full, but would more than likely merge the likes of Cannondale, GT, Caloi and Mongoose, among others, in with brands such as Gazelle , Cervélo, FOCUS, Santa Cruz, Kalkhoff and Urban Arrow. The sale is now expected to close during the first quarter of 2022.

If the full bike brand portfolios are merged it is believed that the deal would unseat the Giant Group as the world’s largest turnover bicycle business and at a time when Dorel Sports is investing in a new, larger Dutch headquarters, to be based in Almelo and opening imminently.

Dorel recorded an annual revenue of around $ 1 billion in 2020, up 14.9%. Meanwhile, PON Holdings turned over nearly € 7.58 billion, of which € 875 million was attributed to the bike division. For Pon it is said that 70% of its sales now revolve around electric bikes.

Pon Holdings recently sold off its 20% stake in the Accell Group, providing the group with a large cash pile to reinvest. In 2018 word got around of a potential buyout offer for Accell, but the group declined offers made for a majority stake.

The deal with Dorel would give Pon a much stronger foothold in the United States where the Cannondale, Schwinn, Mongoose and Caloi are prominent.

The press statement runs as follows:

Dorel Industries Inc. (TSX: DII.B, DII.A) today announced that it has entered into a definitive agreement to sell Dorel Sports, its bicycle segment, to Pon Holdings BV, a Dutch mobility group, for US $ 810 million in cash, representing approximately CAD $ 1 billion, payable to Dorel at closing.

Dorel expects to use the net proceeds from the sale of approximately US $ 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.

“Acting on feedback from our shareholders, Dorel embarked on a thorough review of strategic alternatives earlier this year. Our objective has been consistently to create value for our shareholders. The divestiture of Dorel Sports represents a unique opportunity to unlock value by capitalizing on strong demand for scaled assets in the bicycle segment, ”said Martin Schwartz, Dorel President and CEO.

“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 organization 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, ”Mr. Schwartz added.

The definitive sale agreement with Pon Holdings follows a strategic review and a competitive sales process. Dorel believes that the 100% cash transaction will crystalize 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 excellent 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 will focus its energy and resources on continuing to deliver value to shareholders by accelerating growth and driving margin expansion in its market-leading 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.

“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 monetization 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, ”said Martin Schwartz. “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, ”Mr. Schwartz added.

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