Dorel Industries (TSX:DII.B) is selling its bicycle division for $810 million U.S. to Dutch transportation conglomerate Pon Holdings B.V.
The sale comes as Montreal-based Dorel seeks to reduce its debt load, and after Cerberus Capital Management withdrew its plans to take Dorel private for $437 million after failing to receive enough shareholder support to complete the deal.
Demand for bicycles and bike parts has soared since the onset of the COVID-19 pandemic as more people take up cycling to improve their fitness. Revenue in Dorel's sports division rose 13.8% in 2020 to $265.3 million, representing the biggest segment for the toy-and-bike maker.
The company expects the sale to Pon Holdings to close before the end of the first quarter of 2022.
In addition to paying down debt, Dorel said it aims to use proceeds from the sale to return capital to shareholders and for general corporate purposes. After accounting for closing adjustments, Dorel said it anticipates $735 million U.S. in net proceeds from the deal.
The transaction will see Pon Holdings acquire several high-profile cycling brands such as Schwinn, Cannondale and GT.
Once the deal closes, Pon said in a separate statement that it expects its annual bike sales will reach 2.5 billion euros ($3.59 billion) from 1.5 billion euros in 2020, making it one of the largest bicycle makers in the world.
Dorel stock jumped 102%, or $10.67, to $21.09 per share on the Toronto Stock Exchange after the sale of the company’s bicycle division was announced.
