Dorel acquires Cannondale - Two distinct bicycle divisions to be created
Possible move to Asian manufacturing?
Dorel Industries Inc announced the acquisition of Cannondale Bicycle Corporation of Bethel, CT. Dorel -- which owns the U.S. based Pacific Cycles which in turn markets Schwinn, GT Bicycle, Mongoose, Pacific, Dyno, Murray, RoadMaster, PowerLite and InSTEP brands of bicycle products -- also announced the creation of an Independent Bicycle Dealers division to differentiate the Cannondale and GT bikes from the mass merchant retail products that the other brands primarily focus on, with Cannondale the "crown jewel" of this new division. Sugoi Performance Apparel (which is already Canadian, but who's paying attention) is also included in the purchase from the investment group that currently owns Cannondale and Sugoi. Pacific Cycles will be a stand alone division focusing on the mass merchant channel. The purchase price will be somewhere around US$200 million.
Dorel stated they are seeking acquisitions of of similar high quality, performance bicycle companies to join this new IBD group.
“Dorel recognizes that doing business with the IBD and mass merchant categories is two very different things and requires distinct strategies and specialized people selling the best products for those channels. We clearly realize this and are making the necessary adjustments to best meet the needs of our customers,” said Dorel President and CEO Martin Schwartz.
Cannondale's insane foray into motorcycles bankrupted the company in 2003. After the sale of company assets in a bankruptcy auction, the company sold off its motorcycles operations and was able to turn itself around with a renewed focus on bicycle design and production.
Margins are signficantly higher than mass market bicycles, but Dorel also recognizes that dealing with the IBD channel is "vastly different" from the mass market. "We need to focus much more on quality and innovation," said Schwartz. "Relationships and personal contact are much more important for the independent bike dealers."
Cannondale's manufacturing and assembly currently is done in the United States and Europe; Dorel's management said they'll look at how much to move to Asia. With Cannondale's acquisition and the current business from GT, Dorel hopes to be the number three player in the IBD channel behind Trek and Giant.