On Friday, Dorel Industries (DII.B) announced the sale of one of the Chinese manufacturing plants it had acquired in 2014.
The Montreal-based manufacturer of bicycles, toddler products, and home furnishings said the sale was part of a strategic move to co-develop new products with diverse suppliers.
The Zhongshan children’s products manufacturing plant will be sold to Guangdong Roadmate Group for approximately US $ 51 million gross proceeds. However, Dorel expects to record a non-cash loss of about US $ 8 million due to the transaction.
Dorel will maintain its second manufacturing site in Huangshi and its product sourcing and quality control teams in China, which serve all three of Dorel’s business segments.
The transaction does not include the domestic sales activities of the Shanghai-based juvenile products division, which was acquired along with the factory in 2014 in a transaction valued at the US $ 120 million.
Dorel says Roadmate will continue to be a key supplier, especially for new products co-developed.
“The strategic direction is aimed at enabling the Dorel Juvenile Products division to further reduce the investment required to bring new products to market and to offer a broader product line, while significantly reducing time to market.” Dorel CEO Martin Schwartz said in a statement.
He said the sale would also decrease complexity, improve cash flow and reduce the volatility of direct manufacturing costs attributable to fluctuations in currency and commodity prices.
“Dorel also expects the sale of the Zhongshan plant to simplify the organization and free up resources so that the Dorel Juvenile Products division can focus on product innovation and branding across its various markets. ”
The sale, which is subject to regulatory clearance in China, is expected to close before the end of the second quarter.
Dorel will use the net proceeds of the transaction to reduce debt.
The transaction comes about a month after the abandonment of a Dorel privatization deal spearheaded by Cerberus Capital Management and the Schwartz family, opposed by critical shareholders.