Letko Brosseau Intends to Vote AGAINST Proposal to Take Dorel Industries Private

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Dec 23, 2020, 11:47 ET

MONTREAL, Dec. 23, 2020 /PRNewswire/ - Letko, Brosseau & Associates Inc., an independent investment manager that exercises investment control or direction over approximately 12.6% of the outstanding class B subordinate shares of Dorel Industries Inc. ("Dorel" or the "Company"), today reaffirmed its intention to vote AGAINST the proposed going private transaction of Dorel by Cerberus Capital Management, L.P. and the controlling shareholders of the Company (Martin Schwartz, Jeffrey Schwartz, Alan Schwartz and Jeff Segel or the "Family Shareholders"). The Family Shareholders, through their ownership of Dorel Class A and Class B shares, control approximately 20.3% of Dorel's outstanding shares on an economic basis and 60.8% on a voting basis.

We have looked at the company's press release dated December 21, 2020, regarding its short-term outlook and have the following comments:

The proposal is timed to take advantage of the recent period of depressed share price performance during which Dorel shares have traded at a large discount to the $20-$43 range of much of the last 20 years.
We are long-term shareholders of Dorel and have confidence in the future of the company. We note that both the Family Shareholders and Cerberus are also looking beyond these short-term challenges themselves and are still committed to privatize the company.
We continue to believe that TD Securities' Formal Valuation and Fairness Opinion of Dorel's fair value is too conservative and fails to take into account the long term opportunities of the company, with its portfolio of strong global brands, its international presence and its relations with some of the best retailers in the world (Amazon, Walmart, Wayfair).
Minority shareholders are asked to sell their shares of Dorel at a time when the company has just reported record sales for the last twelve months to September 30, 2020. In its most recent quarter, the Company also reported the highest operating profit margin in any quarter since 2012. We also note wide spread reports in recent months of depleted inventories and shortages of bicycles which suggests continued strong sales reports.
According to the Management Information Circular, the arrangement with Cerberus gives Family Shareholders a 6.4% increase in their ownership of the business from 20.3% to 26.7% at no apparent cost. In addition, Family Shareholders may receive an additional 4.8% should certain targets be met. We estimate these benefits to be worth $53 million based on the value of the proposed transaction at $14.50 per share.

Letko Brosseau intends to vote all shares under its control against this transaction. We have been shareholders for many years and wish to participate in both the full recovery and the potential Dorel offers, alongside Family Shareholders and other minority shareholders.

Letko Brosseau is a Canadian independent investment manager founded in 1987. The firm manages assets for institutional investors and private clients.

FORWARD-LOOKING STATEMENTS

Certain information contained in this press release may constitute forward-looking statements. Forward-looking statements may include estimates, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although Letko Brosseau believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Letko Brosseau's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained in this press release are made as of the date hereof and Letko Brosseau does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.

SOURCE Letko, Brosseau & Associates Inc.