Dorel Industries Inc. has finalized the sale of its bicycle unit to Dutch transport conglomerate Pon Holdings as the Canadian consumer products maker provided more details about what it intends to do with the windfall.
Montreal-based Dorel said Tuesday it received net proceeds of about US$735-million from the sale. The bulk of that amount, US$390-million, will go to its investors as a special dividend of US$12 a share while the remainder will be earmarked to pay down debt, the company said in a statement.
Dorel shares shot up almost 17 per cent in trading on the Toronto Stock Exchange, to close at $23.92.
With the special dividend, Dorel joins other Canadian companies, such as Leon’s Furniture Ltd. and Resolute Forest Products Inc., that have rewarded their investors with one-time payouts over the past year. Leon’s cited its strong cash position as a reason for its dividend as it benefits from stay-at-home spending on things such as TVs and sofas. Resolute cited strong demand for its lumber.
Dorel said it will pay the special dividend to holders of its class A multiple voting shares as well as its class B subordinate voting shares. The dividend will be payable on Feb. 1 to shareholders of record as of the close of business on Jan. 18, it said.
“The declaration of the special dividend is consistent with Dorel’s commitment to return value to our shareholders,” Martin Schwartz, Dorel’s chief executive officer, said in the statement. Using the rest of the proceeds to pay down debt will strengthen the company’s balance sheet going forward, he said.
Dorel announced in October that it struck an all-cash, US$810-million deal with Pon Holdings for the sale of its bike unit, its most profitable division. The high sum fetched took some investors by surprise at the time, and equates to almost twice the amount private equity giant Cerberus Capital Management had offered for all of Dorel.
Cerberus had offered $520-million, or $16 a share, for Dorel. It abandoned the takeover attempt in February of last year under heavy opposition from the company’s independent shareholders. Mr. Schwartz and his family members, who founded Dorel, were aiming to take the company private and partnered with Cerberus on the proposal.
Dorel went public in 1987 after a merger between children’s gear manufacturer Dorel Co. and furniture maker Ridgewood Industries Ltd. The company will continue with those two business lines following the sale of its bicycle unit.
Pon, which owns cycle brands Royal Dutch Gazelle and Cervélo Cycles, picks up Dorel’s Cannondale and Schwinn brands with the purchase. It also gets GT, Mongoose, Charge, Kid Trax and Caloi in a deal that will inflate its annual revenue to €2.5-billion ($3.6-billion), Pon previously said.
Bicycles have been highly coveted items during the COVID-19 crisis as pandemic-weary consumers increase their outdoor activities. Dorel delivered nine consecutive quarters of revenue growth with its cycle business as of September.
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Nicolas Van Praet