Dorel agrees to sale of China manufacturing facility
by CM Staff
The sale of the manufacturing facility is part of the overall strategic direction of Dorel Juvenile that includes the co-development of new products with a diverse supplier base.
MONTREAL — On Mar. 19, Dorel Industries Inc. announced that it had entered into an agreement to sell its juvenile products manufacturing facility in Zhongshan, China to Guangdong Roadmate Group Co., Ltd. for gross proceeds of approximately US$51 million. Dorel will maintain its second manufacturing location in Huangshi, China as well as its product sourcing and quality control organizations in China that service all three of Dorel’s business segments. The sale transaction does not include Dorel Juvenile’s domestic sales operation based in Shanghai that was acquired along with the manufacturing facility in 2014.
The sale of the manufacturing facility is part of the overall strategic direction of Dorel Juvenile that includes the co-development of new products with a diverse supplier base, of which Roadmate is one. It is expected that Roadmate will continue to be a key supplier from the Zhongshan facility as well as from its existing facilities, also based in Zhongshan.
“The strategic direction is intended to allow Dorel Juvenile to further lower the required investment to bring new products to market and to deliver a broader product line with much quicker time to market. It is also expected to decrease complexity, improve cash flow and reduce volatility in the direct costs of manufacturing due to variations in currency and commodity prices. Dorel expects that the sale of the Zhongshan facility will also simplify the organization and free-up resources so that Dorel Juvenile can focus on product innovation and branding across its various markets,” commented Dorel President & CEO, Martin Schwartz.
The sale, which is subject to approval by regulatory authorities in China, is expected to close before the end of the second quarter. Dorel intends to use the net proceeds from the sale to reduce existing debt. As a result of the sale, Dorel expects to incur a non-cash loss of approximately US$8 million.