Dorel Sports has today announced it will be selling its bicycle division to Pon Holdings in an $810 million deal.
Pon Holdings currently owns Santa Cruz, Focus and Cervelo but will now be able to add brands such as Schwinn, Cannondale and GT that all fall under the Dorel Sports umbrella. Pon.Bike is claiming that the acquisition will allow it to generate an expected annual revenue of €2.5 billion, which, if true, could make it the biggest bicycle company in the world, replacing Giant Bicycles who announced annual revenue of $2.45 billion annual revenue in 2020.
Pon.Bike will be made up of:
Former Dorel Sports brands- Cannondale
- Schwinn
- Mongoose
- GT
- Charge
- Caloi
- KidTrax
Current Pon.Bike brands- Gazelle
- Kalkhoff
- Focus
- Santa Cruz
- Cervélo
- Swapfiets
- Urban Arrow
- BBB Cycling
- Lease a Bike,
- Union
- Reserve Wheels
- Juliana
Pon first entered the high end mountain bike market in 2011 when it purchased Derby Cycles, the parent group of Focus. Since then it has purchased
Santa Cruz in 2015 and
bid $895 million for a takeover of the Accell Group, which contains Lapierre, Haibike and more. In the end, it settled for a 20% stake of Accell, which it
sold late last year.Pon described the latest deal as a "logical step" and said it can learn from Dorel's e-commerce experience. The Dutch conglomerate is positioning itself to be a "global leader in ebikes" and this acquisition means that 70 per cent of its brands now offer bikes with motors. It sounds like we can expect more eMTBs from Dorel's brands in future too as Pon.Bike claims that Dorel's brands will benefit from its "innovation, design, knowledge and creativity" and "can leverage the experience of Pon.Bike with electric bikes". The move also grants Pon greater access to the US market through brands such as Schwinn, and even to the South American market through Caloi.
| Today’s step is a milestone in the creation of a world-leading bike company with a variety of quality brands. With the acquisition of Gazelle in 2012 we launched a strategy that step by step led us to the 1.5 billion in revenue bike group that we are today, with great comfort and performance bicycle brands, of which 70 percent electric.
As a result of this strategy. We have now reached a highlight with the acquisition of Dorel Sports. They have a rich history with their iconic bike brands all with an impressive heritage. Schwinn is an institute in the US. Caloi the pride of Brazil. And Cannondale is a truly global brand with an excellent reputation. Dorel Sports really is complementary to Pon.Bike and that’s why this is such a logical step.
Together we can further cater the ever growing demand for quality and electric bikes, whether it’s for urban use, leisure or sports. Biking is not only healthy, it also plays a critical role in fighting inner-city congestion. It’s one of the most sustainable ways of transport. We are determined to make bikes a powerful part of mobility. We look forward to working together with the Dorel Sports people all over the world and welcome them to the Pon family.—Janus Smalbraak, CEO of Pon Holdings |
For Dorel, the 100% cash funds raised will apparently be used, "to reduce indebtedness, return capital to shareholders and for general corporate purposes". Dorel intends to announce specific details regarding the use of the $735 million net proceeds from the sale at the time of closing.
| Acting on feedback from our shareholders, Dorel embarked on a thorough review of strategic alternatives earlier this year. Our objective has consistently been to create value for our shareholders. The divestiture of Dorel Sports represents a unique opportunity to unlock value by capitalizing on strong demand for scaled assets in the bicycle segment.
On behalf of the Board of Directors, I extend my sincere thanks to the entire Dorel Sports team for their outstanding efforts over the years. Dorel Sports has been an important part of our organization since 2004 and we are very proud of the global success it has achieved. While making the decision to sell Dorel Sports has been difficult, we are confident that this transaction represents full value for Dorel shareholders.—Martin Schwartz, CEO and founder of Dorel |
The transaction has been recommended unanimously by the Boards of both companies and is expected to be closed before the end of the first quarter of 2022. Lazard and ING acted as financial advisors and Goodmans as legal advisor.
More info can be found in the
Pon press release, here, or the
Dorel Group press release, here.
By all accounts, Santa Cruz and Cervelo have not shit the bed since they were purchased. Quality has gone up if anything at either or, employees are happy, and their customer focused businesses. Pom isn't a story of buying up distressed companies, shorting them, and loading them up with ungovernable debt to put them out of business for profit. They're just a standard "buy things that add value to the portfolio" fund.
Gamestop had people on the board actively pushing to f*ck it up before Cohen took over. To the best of my knowledge, GT has nothing of that nature, and Cannondales relationship with REI is a strong one. This looks to me like Pom thinks they're either undervalued or can bring something to the table to improve their value.
Donno. I don't have any love or appreciation for Pom, but they also don't seem like their profits are aimed towards pushing companies under, their profits come when their companies succeed.
Can’t afford post-COVID prices, so I’m in!!!
PonHub?
The problem with that is that enthusiasts that feel concerned represent frak all when it comes to bike sales and the potential gain isn't enough to create FOMO.
"Acting on feedback from our shareholders, Dorel embarked on a thorough review of strategic alternatives earlier this year. ******Our objective has consistently been to create value for our shareholders.****** The divestiture of Dorel Sports represents a unique opportunity to unlock value by capitalizing on strong demand for scaled assets in the bicycle segment."
All this jivey lingo persists in startup culture that is little more than branding pursuit and a get-bought-out, get-rich-quick scheme.
This juxtaposes nicely to the Trek sustainability study at least *attempting to appear as though they care about things in addition to profits.
This is just unencumbered capitalism and stock market gaming.
CEO conversation into the mix. However, it definitely sounded like I was calling them vulture capitalists so I didn't communicate it very well. But, to a certain extent, they are still going to trim brands/items/features/services that aren't profitable enough. That might be reducing backstock of warranty replacement items, for example. In many cases those are the very items that bring added value to the customer. They will happily gobble up and dispose of those morsels. My point is that when investors are served, it is not serving you and I, or my parent's retirement investments, or even the few extremely wealthy people I know. It is benefitting this very small class of investors that have each other in their collective rolodex. 'Business Finance 101,' then, is now a corrosive feature of capitalism unless implemented with some semblance of ethics or service beyond profit.
All that said, Santa Cruz seems to do fine these days and has been great with warranty for myself and people I know.
Dorel and Pon are investment conglomerates that don't care about you as a customer because you aren't their customer, their customer is the shareholder. This is the letter their customers want to see.
These guys own a ton of companies in pretty much any industry involving mobilizing people; Audi, VW, Bugatti, Bentley, Lamborghini, MAN, Porsche, SKODA, SEAT, W&O, VBH, RH Marine, Santa Cruz, Focus, Cervelo, Union, Urban Arrow.... This is just them adding to their bike portfolio; just like all those other brands carried along being those brands when Pon bought them, so too will GT and Cannondale. This is really a non-story for people who actually ride the bikes.
Then there are companies like Dorel and Pon. These are neither PE or VC's. They are conglomerates that are either private or public, but either way they are not actively taking in investor money like VC's or PE firms are, so they operate in a much different way.
Once you get big enough and you become the customers' one of a couple, or the only choice, customer-orientated models no longer matter and you normally run into these places committing actual crimes against their own customers for profit. This is why being overly friendly to businesses is extremely stupid. It always happens.
I'm a huge fan of B Corps... and you all should be too.
bcorporation.net
That said , when I do hear or read it, my bullshit antenna shoots up, and I can’t help thinking ‘who’s this a*shole?’
PON has actually been more about cars than about bicycles since the 1930s, but they seem to be going more and more back in the bike direction so I think it's a good thing. They seem to give the companies they buy a lot of freedom and do not squeeze them to death. Not that they are always the nice ones. They were implicated in a corruption case a while back, though nothing was proven.
Good, more bikes for loyal customers who have respect for locally made products and the people behind them. Let the people who hate wait for another year so they can get their 2022 Epic S-Works Kenevo Yet-E Session $16k model in 2024….people are gonna be real sad around Christmas this year.
Maybe, just maybe, this will teach people about being wasteful consumers who burn through garbage product like candy because, “they can just Prime another one.”
Nope, it leads to a monopoly or an oligopoly with collusion, which is the same thing in the end.
I can't imagine what bikes would cost if we didn't have large scale players available to produce for smaller brands.
By the way, pourquoi is never written with an s
OMG, an internet handle that isn't grammatically correct? Call the language police! hahaha Or maybe call gmail as the proper spelling wasn't available when I created a burner account for social media BS.
Even for appliances, in the end it's a race for cheaper prices that doesn't work in favour of the customers as they're sold cheaper and cheaper appliances no matter the price they pay (gotta maximize profit by just changing the design but not the parts inside, you know?)
If it lead to having the same product sold at a lower profit then I would agree with you, but that's not what we see, profit margins increase, products are made by what is basically slave labour using cheaper and cheaper materials, we're filling landfills with stuff made in China that doesn't last a quarter of the time the same item built in the 60s lasted... Except for cars, their value has increased through the years as they last much longer than cars back then, but it's a highly competitive market with a lot of players.
I think you should also consider that whilst people talk about many of the issues you raised they clearly do not place much value on them, as consumers prove over and over again that price is the driver of value in most of their purchase decisions when it comes to commoditized products (especially environmental, a small portion of the market actually purchases in line with their "beliefs", and an even smaller portion is actually affluent enough to afford to consider the environment when making a purchase). Companies then spend inordinate sums trying to influence customers to consider other factors, to value things other than price, but in most mature categories the majority of volume is attributed to the lowest priced items (even bikes, far more dept store bikes are sold vs the ones we all ride).
There are always exceptions, and no economic theory plays out perfectly in the real world. And there are also a huge amount of factors that play into how a concentrated industry will behave. Consider telecom has a relatively low price elasticity as it is seen as essential. Consumer psychographics, trends, market regulations, etc.
Perhaps I should have stated Stakeholder value over Customer value (remember in most businesses the customer is not actually the consumer).
As for your telecom example, in metropolitan Ontario you can choose from nearly 20 different providers that run on one of the networks provided by the big corporations. They modestly undercut and are still relatively expensive vs the rest of the world because the rates they are charged are controlled by government regs, not the market.
Anyway, we're getting nowhere. I think we're agreeing, just taking different angles to look at the topic. I simply responded the first time because your statement was oversimplified... when innovation begins to stagnate and products commoditize in the eyes of customers the industry naturally consolidates, according to economic theory.
ciao
What this does and I honestly can't believe PB hasn't gone into it in this article is allows Pon to funnel more brands through one of their other recent purchases. Mike's Bikes. So MIke's can be expanded both online and in brick and mortar situations.
It also improves... if done correctly... their functionality globally. Each of these companies is stronger in certain areas. Now they can combine assets, sales teams, distribution centers, etc. This should in theory help each brand grow a bit stronger or at the very least increase profit margin by combining footprints.
The reality: a handful of companies make all your bike crap
What do you mean some large companies decided to do a thing? As an cyclist myself I feel entitled to a sweet bike from the subject company, but the company should have no expectation or right to make a profit. In fact, Why won’t the shareholders just agree to recategorize the company as a charity? It’s because they’re greedy!
What their ROI will be, interest on any loan, restructuring, distribution cost savings, and forward plan for the companies.
Also... how many patents they have bought as part of that $810M?
pon.bike
They describe the role of the Santa Cruz brand as "Darwinism in Action". Wonder if Minaar is going to have that on his jersey next season. I hope they reconsider. I guess they are very clear in their direction and job descriptions.
Sellouts !
Why aren’t we talking about the “Sellouts”…
I'm not into curvy bikes at all though.