The group, led by U.S.-based Cerberus Capital Management LP, that’s looking to take Dorel Industries Inc. private raised its takeover offer by 10 percent after receiving objections to its initial offer from a significant investor.
Cerberus is now offering Canadian $16 a share for the shares not held by members of the Schwartz family, including Dorel’s chief executive officer. The firm had earlier offered C$14.50 per share. The increased offer was unanimously approved by Dorel’s board, with members of the Schwartz family recusing themselves. The new offer is more than halfway between the fair market value of $14 to $17 per share set out in a formal evaluation by TD Securities Inc. as of November 12.
On Friday, the Canadian investment firm Letko, Brosseau & Associates Inc, which owns about 12.5 percent of the outstanding shares, said it would vote against the offer.
In a press release, Letko Brosseau said the CA$14.50 offer was “opportunistic and significantly undervalues” Dorel. The firm said an equity valuation prepared by TD Securities for the potential buyers was too conservative. The firm said TD’s analysis, based on the value of comparable previous transactions, put the equity value between $14.22 and $23.54 per share, or a midpoint of $18.88.
The termination fees also have been increased. Dorel must now pay $15.6 million if Cerberus chooses not to exercise its right to match a superior proposal, up from a break fee of $14.1 million. The break fee the buyer must pay if it does not close the deal and has been raised to $26 million, up from $23.6 million.
On December 28, the board delayed the shareholder meeting until February 16 to give shareholders more time to consider the effects of the second wave of COVID-19 on Dorel’s future business. The meeting will be held virtually.
Dorel Industries operates three businesses: juvenile products, bicycles and home products. Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi, and IronHorse.
Photo courtesy Dorel Sports