UPDATE 2-Dorel in premium bike market with Cannondale buy
(Adds quotes, background. In U.S. dollars unless noted)
TORONTO, Feb 4 (Reuters) - Dorel Industries Ltd (DIIb.TO) raced into the high-end bike market on Monday with the purchase of Cannondale Bicycle Corp in an all-cash deal worth $190 million to $200 million.
Dorel's stock jumped 6.5 percent to its highest level in two months following news of the deal, which the consumer goods manufacturer said will immediately add more than 9 Canadian cents a share to its annual earnings.
Montreal-based Dorel said it sees the bicycle industry as "a true value driver," with Cannondale, a premium U.S. designer and manufacturer, as its "crown jewel."
"I think this is going to give us the platform to make a run at becoming the most important and best bicycle company," Jeffrey Schwartz, Dorel's chief financial officer, said on a conference call.
Dorel, which also makes furniture and children's products, already manufactures bicycles through its Pacific Cycle division, with brands including Schwinn and GT. It said the acquisition is being financed through debt.
It said it aims to be the third-biggest player in North America's independent bicycle industry with the new purchase, behind Trek and Specialized.
The final price of the deal, which includes Sugoi Performance Apparel, depends on Bethel, Connecticut-based Cannondale's earnings for the year ended June 30.
Cannondale's sales, combined with Sugoi's, were about $200 million last year.
Dorel will sell Cannondale and GT bicycles, as well as Sugoi products, under its new high-end Cannondale Sports Group division. The company said this division, focused on independent bicycle dealers, will grow either through the innovation of products or through acquisitions.
Pacific Cycle, which Dorel purchased in 2004 and included the Schwinn, Mongoose and GT brands, will run separately as a mass merchant division.
"Brand is very important, service is very important ... and it's nice for a change to not be as cost-oriented as you are with some of the mass market people that need products based around a price point," Schwartz said.
"With the independents we can focus much more on product and quality and innovation, and generally you get paid for that."
Dorel bought Cannondale and Sugoi from an affiliate of Pegasus Capital Advisors, which acquired them in 2003.
Current Cannondale management, headed by CEO Matt Mannelly, will remain on within Dorel's new independent bicycle division. Continued...
