Dorel Industries Inc. announced that it has reached an agreement, in principle, regarding a transaction whereby Dorel would be taken private by a buyer group led by affiliates of Cerberus Capital Management, L.P. and family shareholders, including Martin Schwartz, Jeffrey Schwartz, Alan Schwartz and Jeff Segel.
The buyer group submitted a non-binding proposal to acquire all of Dorel’s outstanding Class A Multiple Voting Shares and Class B Subordinate Voting Shares not currently held by the family shareholders and their immediate families at a price of C$14.50 per share. Dorel has granted the buyer group exclusivity through November 10, 2020 to complete negotiations and enter into a definitive transaction agreement between Dorel and the buyer group.
In December 2019, the family shareholders informed Dorel’s Board of Directors of their intention to initiate a process to seek a partner for the potential privatization of Dorel. On December 19, 2019, the Board of Directors formed a special committee of independent directors comprised of Norman M. Steinberg (chair), Alain Benedetti, Dian Cohen, Brad A. Johnson, Sharon Ranson and Maurice Tousson to oversee and supervise the privatization process. Since its formation, the special committee has been advised by McCarthy Tétrault LLP. BMO Capital Markets was retained as a financial advisor to Dorel and conducted a comprehensive process, contacting more than 25 potential financial sponsor partners over a period of eleven months.
Following financial and business diligence conducted by, and discussions with, numerous potential interested parties and the review of resulting non-binding proposals by the special committee and the family shareholders, the family shareholders granted exclusivity to Cerberus on September 4, 2020 to complete due diligence and negotiate terms for the proposed privatization. On September 10, 2020, the special committee hired TD Securities Inc. as independent financial advisor and independent valuator pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. Since then, the buyer group and the special committee have had extensive discussions and negotiations, which resulted in the non-binding proposal for the purchase of all the issued and outstanding class A multiple voting shares and class B subordinate voting shares of Dorel not currently held by the family shareholders and their immediate families at a price of C$14.50 per share.
The proposal price represents a 32 percent premium to the closing price of Dorel’s Class B Subordinate Voting Shares on the Toronto Stock Exchange on September 4, 2020, the date on which the family shareholders granted exclusivity to Cerberus, and for the periods ended Friday, October 30, 2020, a 19 percent premium to the 60-day volume-weighted average trading price (VWAP) and a 7 percent premium to the 30-day VWAP of Dorel’s Class B Subordinate Voting Shares on the TSX.
The family shareholders are Martin Schwartz, Dorel’s president and chief executive officer, Jeffrey Schwartz, executive vice-president and chief financial officer, Alan Schwartz, executive vice-president, operations, and Jeff Segel, executive vice-president, sales and marketing. Each of the family shareholders is also a director of Dorel. The family shareholders currently own, directly or indirectly, or exercise control or direction over, an aggregate of 3,999,960 Class A Multiple Voting Shares and 2,231,639 Class B Subordinate Voting Shares, representing approximately 19.18 percent of Dorel’s outstanding shares on an economic basis and 60.17 percent on a voting basis. The family shareholders have advised the special committee that they are not interested in any alternative transaction, including the sale of their interests in Dorel or the sale of any of Dorel’s business segments or material assets.
The non-binding proposal is subject to Dorel and the buyer group entering into a definitive agreement. There can be no assurance that Dorel and the buyer group will enter into a definitive agreement to take Dorel private, or, assuming such an agreement is entered into, that the proposed transaction will be completed. The proposed transaction will be subject to shareholder, regulatory and court approvals, including approval by a majority of votes cast by Dorel’s minority shareholders (excluding the family shareholders, their immediate families and other holders of Class A Multiple Voting Shares). Dorel does not intend to make any further announcements or to provide any updates with respect to the potential going-private transaction unless and until Dorel enters into a definitive agreement.
Dorel Industries Inc. is the parent of Dorel Sports brands, which include Cannondale, Schwinn, GT, Mongoose, Caloi, and IronHorse. The company’s other businesses include Dorel Juvenile and Dorel Home.
Photo courtesy Dorel Industries/Cannondale
