Dorel Industries and Cerberus Capital Management have terminated an agreement in principle that would have allowed the Canadian company to go private. As a result, a meeting of shareholders that was planned for Feb. 16 to endorse the deal has been cancelled. First reached last November, when the purchase price for the company’s shares was set at 14.50 Canadian dollars, the agreement called for equity funds controlled by Cerberus to pay Dorel shareholders a purchase price of C$16.00 per share in cash. The shares held by the family of Dorel’s president and CEO, Martin Schwartz, were purposedly excluded from the proposed tender offer.
With the plans for going private being shelved, the company’s stock price on the Toronto Stock Exchange rose marginally to C$15.78 on Feb. 12, valueing the company at C$512.9 million (€334.6m-$405.6m). Dorel has annual sales of around C$2.0 billion(€1.3bn-$1;6bn). With its Dorel Sports division - consisting of brands like Cannondale, GT, Caloi, Mongoose, Ironhorse and Schwinn - Dorel is a major factor in the global bicycle market. It also has a large furniture division.
The termination of the arrangement was preceded by exchanges and discussions between Dorel and many of its independent shareholders, some of whom had felt that the price undervalued the company, especially in view of the rising demand for bicycles. After the deadline for their consultation passed on Feb. 12, the decision to put an end to the going-private transaction was unanimously approved by Dorel’s board of directors on the unanimous recommendation of a special committee composed of Dorel’s six independent directors.
“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity,” Dorel concluded in announcing the termination of the arrangement.