An upbeat, optimistic Cannondale concluded its rapid transition through the Chapter 11 bankruptcy process Monday with the closing on the sales of the assets of its bicycle and motorsports divisions to affiliates of Pegasus Partners II, L.P.
Cannondale had filed for Chapter 11 protection in late January following mounting losses incurred by its motorsports division.
Going forward, the bicycle business will be incorporated as the Cannondale Bicycle Corporation. Dan Alloway and Scott Montgomery will continue as senior executives of the Company as Vice President of Sales and Vice President of Marketing, respectively. In addition, the Company is recruiting a Chief Financial Officer and a Chief Operating Officer to bring additional stability to the business. Company founder Joe Montgomery will be a consultant to the Company.
“Were extremely happy to have concluded the Chapter 11 process so quickly”, said Scott Montgomery, who also provided some perspective. “We were in Chapter 11 for less than 100 days, but weve been a successful part of the bike industry for 32 years. We are back to our roots and it feels good to bring renewed focus to the bicycle business.”
Alloway echoed Montgomery’s optimism. “Chapter 11 of the Bankruptcy Code is designed to help a company come back stronger and more competitive than before, and that’s exactly what’s happened with Cannondale,” said Alloway. “Every day were producing and shipping new bikes, apparel and accessories from our factory in Bedford, Pennsylvania. The products are selling through well at retail, and weve got a very strong line planned for 2004.”
Pegasus plans few changes to Cannondale’s bicycle business, which remained profitable throughout the Company’s motorsports efforts. Pegasus will move forward with Cannondale’s existing staff, facilities, dealer network and overall strategy in the U.S. and at its European, Japanese and Australian subsidiaries. Pegasus plans to sell Cannondale’s motorsports assets.
David Uri, a Partner at Pegasus, explained why no other significant changes are planned. “Cannondale’s difficulties were not related to its bicycle business,” said Uri. “The problems came from its motorsports effort. The bicycle division has remained profitable, which is a stunning accomplishment given the burden and distraction that motorsports imposed.”
“We have no desire to disrupt a winning formula,” continued Uri. “As weve said before, our job now is to support and supplement the existing Cannondale team to allow them to concentrate on what they do best – designing, manufacturing and marketing lightweight, high-performance bicycles for the specialty retail market.”
The sales of the assets of both divisions were conducted pursuant to an auction under Section 363 of the United States Bankruptcy Code in the U.S. Bankruptcy Court in the District of Connecticut (Bridgeport Division), and were sold free and clear of all liens, claims, interests and encumbrances. Cannondale filed a voluntary petition for Chapter 11 bankruptcy protection on January 29, 2003. Cannondale’s largest secured creditor, Pegasus had agreed in late January to act as the “stalking horse” bidder in the auction, which took place on March 20, 2003. On March 28, 2003 the Bankruptcy Court approved the Asset Purchase Agreement by and between Cannondale and Pegasus. Pursuant to the terms of the Asset Purchase Agreement, substantially all of Cannondale’s assets, including the Company’s bicycle and motorsports divisions were purchased by affiliates of Pegasus.
