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Dorel Shooting for No. 1 with IBD

Published February 4, 2008

MONTREAL, Quebec (BRAIN)—Dorel Industries’ purchase of Cannondale now positions the Canadian consumer goods company right behind Trek and Specialized within the independent bicycle dealer (IBD) channel, according to Dorel president and chief executive officer Martin Schwartz.

“We hope to be the No. 3 player in North America with this transaction,” Schwartz said. “Our goal is to be No. 1 in the IBD channel.”

The all-cash deal worth $190-million (U.S) to $200-million (subject to Cannondale's earnings results for the year ending June 30, 2008) sent Dorel stock soaring yesterday to 6.5 percent—its highest level in two months. Schwartz said the deal will add more than 9 cents (U.S.) a share to its annual earnings.

As a result of the deal, the company's Recreational/Leisure segment is being split into two distinct operating divisions.

Former Pacific Cycle president and chief executive officer Jeff Frehner will serve in that same role for Dorel’s new Independent Bicycle Dealers (IBD) division, the Cannondale Sports Group, focusing exclusively on its premium-oriented brands that include Cannondale, GT Bicycles and Sugoi.

“Cannondale will be the crown jewel of this division,” Schwartz said.

Alice Tillett, who had been executive vice president, mass and sporting goods channel at Pacific Cycle, has been named president of the company. Pacific Cycle and brands that include Mongoose and Schwinn will become a stand-alone division with an exclusive focus on mass merchant customers.

Frehner said going forward it’s going to be “business as usual” at Cannondale, not anticipating any sudden changes in the way the Connecticut-based company does business, or where it does business. Matt Mannelly will continue on as Cannondale president and chief executive officer.

“We’re pretty decentralized as it is,” Frehner said of Pacific Cycle, referencing GT’s Lake Forest, California R & D facility. “Will everything be analyzed? Yes.”

Frehner hopes retailers get behind this deal. “I hope over time we can provide dealers a more [multiple brand] one stop shop,” Frehner said.

For full story and analysis be sure to read the March 1 issue of Bicycle Retailer and Industry News.

—Jason Norman

Topics associated with this article: Mergers/Acquisitions

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