Montreal-based Dorel soars on $810 million sports unit sale to Pon

Montreal-based Dorel soars on $810 million sports unit sale to Pon

The sports division includes several bicycle products and brands, including Caloi, Cannondale and GT Bicycles.

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Dorel Industries Inc., a Canadian maker of children’s products, rose as much as 121% on Tuesday after agreeing to sell its sports segment to Dutch group Pon Holdings BV for $810 million in cash.

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Montreal-based Dorel expects to use the proceeds from the sale to pay down its debt and return capital to shareholders. The stock was up 97% to C$20.55 as of 2:27 p.m. in Toronto.

The boost in the share price is a vindication for investors who resisted an attempt by Cerberus Capital Management LP and members of Dorel’s founding family to take the company private earlier this year at C$16 a share. The deal failed when Letko Brosseau & Associates Inc. and other large shareholders balked at the price.

The sports division includes several bicycle products and brands, including Caloi, Cannondale and GT Bicycles. TD Securities analyst Derek Lessard said the sale to Pon will allow Dorel to repay all of its debt while still leaving $310 million for other purposes.

Lessard upgraded his Dorel rating to buy from hold and raised the price target to C$46 from C$15.50.

“Given the strong demand for bikes due to the pandemic, partially offset by uncertainties caused by the ongoing supply-chain and labor challenges, we believe that the valuation is fair,” he said in a note to clients.

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