Dorel Industries bought a 70 percent interest in Caloi, a major Brazilian manufacturer of bicycles and equipment and one of the largest bike brands in Latin America, the company announced Thursday.
Caloi's sales in 2012 were close to R$ 273.5 million ($111.8 million) and it has an estimated market share in Brazil of more than 40 percent. Dorel said the purchase price was a high single digit multiple of Caloi's EBITDA. The transaction is expected to be immediately accretive to Dorel's earnings.
Caloi joins Dorel's bike division, which includes Cannondale, Schwinn, GT, Mongoose, Iron Horse and Sugoi.
Caloi manufactures a full range of bikes, including mountain bikes, urban, recreational, high performance road bikes and children's models. Its products are distributed across Brazil in a variety of channels, from mass market to independent bicycle dealers. The company employs 900 people at its various locations, including its head office in S?o Paulo, the Technology and Logistics Center in Atibaia and its manufacturing facility in Manaus, which produces more than 700,000 units per year.
Dorel said Brazil will become a production hub for Dorel. Caloi's factory in Manaus will assemble bikes for Dorel's brands to serve the Brazilian and export markets.
"This new partnership with Caloi positions Dorel as one of the largest bicycle companies in the world, as well as a leader of the Americas," said Martin Schwartz, Dorel's president and CEO. "We have built this segment into a billion dollar business in just nine years and see tremendous growth ahead. We remain focused on maximizing this sector so that we may continue to enhance shareholder value. We are delighted to welcome the Caloi team to Dorel. Eduardo Musa, current Caloi CEO, will become the bicycle segment's Brazil president and will join its global management team."
Dorel has been doing business in Brazil since 2009 when it established a new juvenile products division there.
"Despite current economic challenges in the country, which we are well aware of, we believe the consumer market is good and is headed in the right direction," Schwartz said. "We see this transaction as a solid opportunity."
"Dorel has been steadily growing its global reach over the past four years in key growth markets such as China, Eastern Europe and now Brazil," said Bob Baird, CEO and group president of Cannondale Sports Unlimited, formerly Dorel's recreational and leisure division. "The addition of Caloi to our already strong portfolio of brands and global presence will help us achieve our goal of seeing our brands in every household, creating inspired experiences and improving the health and wellness for consumers around the world.
"Caloi's strong management team, its large distribution base and local production capabilities will accelerate the development of Dorel's bicycle brands in Brazil and benefit Brazilian consumers who will be able to access Dorel's strong international brands. The Caloi brand will also benefit from our technologies and expertise in building high performance cycling products," added Baird.
Caloi CEO Musa said he expects the Caloi/Dorel partnership to "strongly benefit the Brazilian bicycle market. The expansion of Dorel's bicycle brands in our market will help meet the increasing demands of the Brazilian consumer for high quality, matched with innovation and style."
Dorel Industries has annual sales of $2.5 billion and employs 5,400 people in 24 facilities worldwide. Revenue in its bike division was $928 million last year.
