Montreal-based Dorel Industries Ltd. is racing to equip serious cyclists with the purchase of high-performance bike manufacturer Cannondale Bicycle Corp. in an all-cash transaction valued at US$190 million to $200 million.
Cannondale, a maker of high-end bikes based in Bethel, Conn., had 2007 sales of about $200 million, including the Vancouver-based Sugoi Performance Apparel division which is part of the acquisition.
Dorel designs and manufactures consumer goods in the juvenile, recreation/leisure and home furnishings segments. The company employs about 4,700 people in 15 countries, generating annual sales of US$1.8 billion.
Its new Cannondale Sports Group, which will include premium brands, will be part of a new division focused on specialist bicycle shops.
“This transaction strengthens this position considerably and immediately gives us a global presence in this highly strategic category,” Dorel president and CEO Martin Schwartz said in a conference call.
Pacific Cycle, a leading U.S. bicycle company purchased by Dorel in 2004, will operate as a separate division concentrating on the mass merchant category with its Schwinn, Mongoose and Roadmaster brands.
Schwartz said the Cannondale purchase is consistent with Dorel’s plan to concentrate on its recreation/leisure and juvenile businesses, which provide the greatest potential to increase shareholder returns.
“Since purchasing Pacific Cycle in 2004, we have learned a great deal about the bicycle industry and have found it to be a true value driver for Dorel.”
Jessy Hayem of Desjardins Securities said the Cannondale acquisition fits Dorel’s strategy of positioning itself as a diversified consumer products company with solid brand names.
“It will also further reduce the focus on home furnishings, which has been a drag of late,” she wrote in a note to clients. “Additionally, it will enable Dorel to diversify its customer base away from mass retail.”
