Dorel completes sale of sports segment for $1B
MONTREAL – Consumer goods giant Dorel Industries has completed its previously announced sale of Dorel Sports, which makes bicycles and other equipment, to Pon Holdings B.V. of The Netherlands for US$810 million, approximately C$1.03 billion.
In a statement, the company said that at closing it received net proceeds from the sale of approximately US$735 million, which Dorel will use to reduce its debt – which is estimated at C$542 million – and to pay a special dividend of US$12 per share. The transaction saw Dorel sell 100% of its shares in all wholly owned subsidiary companies making up the Dorel Sports segment as well as certain related assets.
“We are very pleased to have completed the sale of Dorel Sports to a great company like Pon. On behalf of the board of directors, I again thank the Dorel Sports team for their commitment to Dorel and their great achievements,” Dorel president and chief executive officer Martin Schwartz said, adding, “We believe that with this sale, Dorel has realized full value for Dorel Sports, for the benefit of Dorel and our shareholders.”
Dorel Industries also announced its board of directors has declared a special dividend of US$12 per share for all on Dorel’s outstanding Class ‘B’ Subordinate Voting Shares and Class ‘A’ Multiple Voting Shares. The payout will total approximately US$390 million and will be made on February 1 to all shareholders of record as of the close of business on January 18, 2022.
“The declaration of the special dividend is consistent with Dorel’s commitment to return value to our shareholders. After consulting with Dorel’s financial advisors, the board of directors has decided to use the net proceeds from the sale of Dorel Sports to pay the special dividend and to reduce Dorel’s indebtedness. We believe that the result will be both value for our shareholders and a stronger balance sheet for Dorel going forward,” said Schwartz.
The Toronto Stock Exchange (TSX) has determined to implement its “due bill” trading procedures with respect to Dorel’s special dividend of US$12 per share. Due bills are entitlements which attach to listed securities undergoing certain material corporate events, including a cash dividend in an amount equal to or greater than 25% of the market value of the underlying listed securities.
At press time, Dorel Class ‘B’ shares were trading for C$24.16 on the TSX.
Analysts following Dorel seem to agree that post-sale, the company will have a renewed focus on improving earnings in its remaining home and juvenile segments. The paying down of debt will bolster its ability to weather the challenges posed by acute supply chain and raw material pressures which expected to persist, at least in the short term.
Most also noted the selling price for Dorel Sports was three times greater than the company’s ‘market cap’ (the value of all outstanding shares) which was estimated at C$343 million in the weeks prior to closing.
Dorel to launch normal course issuer bid
The company also announced the TSX has approved a new normal course issuer bid (“NCIB”), which will allow Dorel to purchase for cancellation a maximum of just under 1.9 million Class ‘B’ shares, roughly 10% of the 18.9 million shares forming the public float.
The shares may be purchased through the TSX and on alternative trading systems in Canada over the twelve-month period from January 6, 2022 to January 5, 2023.
Any shares purchased by Dorel under the NCIB will be at the market price of the shares at the time of purchase and the normal TSX rules will apply.
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