Dorel Industries buying juvenile business of Hong Kong's Lerado Group

By Michael Lauzon
Correspondent

By Steve Toloken
News Editor / International

Published: June 16, 2014 4:06 pm ET
Updated: June 16, 2014 11:23 pm ET

Image By: Dorel Industries Inc. Montreal's Dorel Industries sells juvenile products such as strollers, car seats and bottles under a variety of brand names including Bebe Confort and Safety 1st.

Related to this story

Topics Consumer Products, Mergers & Acquisitions, China, Canada, Asia

Ten days after a major Chinese juvenile products company announced its plan to establish a North American production base, a big deal in the reverse direction was announced.

Dorel Industries Inc. of Montreal said June 16 it signed an agreement to acquire the juvenile business of Lerado Group of Hong Kong to give it a beachhead in China.

In the earlier-announced deal, Goodbaby International Holdings Ltd. of Kunshan City, Suzhou, China, revealed its intention to buy diverse child products firm Evenflo Co. Ltd. of Miamisburg, Ohio.

Dorel said it agreed to pay HK$930 million (US$120 million) for the Lerado juvenile products stake. Dorel said the business is one of the largest juvenile product manufacturers in China that designs and produces a wide range of infant and juvenile items. Lerado Group is a subsidiary of Lerado Group (Holding) Co. Ltd., publicly traded on the Hong Kong Stock Exchange.

Dorel will enter manufacturing in China with the acquisition of two Lerado plants in Zhongshan, one of which is the headquarters facility, a recently completed factory in Huang Shi and a research and development center in Taiwan. It stands to get more than 2.5 million square feet of space and more than 5,000 employees.

A Dorel spokesman said all the company’s juvenile products are currently made in Asia, especially China, except car seats, which are made in Indiana. Lerado now makes about 15 percent of Dorel’s juvenile products so the two companies are familiar with each other. Goodbaby has been making Dorel’s strollers but Goodbaby will soon become a Dorel competitor when it completes the acquisition of Evenflo, probably by late summer.

Lerado, which is traded on the Hong Kong stock market, said in a July 17 filing that the juvenile products division being sold lost money last year and weak markets in the United States and Europe, which account for 75 percent of sales, made a quick turnaround unlikely.

"With the slower than expected economic recovery in the U.S. and Europe, coupled with the declining birth rates experienced by the developed countries, the higher operating costs in [China] and the continuous appreciation of Renminbi, the export markets of the group continue to be weak and rapid turnaround in market conditions is not expected in the near future," the company told Hong Kong regulators.

"Under these circumstances, the company decided to exit the disposed business," it said.

It said the juvenile products business lost HK$9.3 million (US$1.2 million). Based on a Plastics News calculation, that unit had sales of about HK$1.45 billion (US$187.1 million) in 2013.

Lerado said it would shift its focus on its two remaining units, making plastic toys and medical devices, and use the proceeds to pay a special dividend of HK $226.8 million (US $29.2 million) to shareholders, with the rest for expanding its medical business and working capital.

The remaining divisions will have about 270 employees, with 2013 annual sales of HK $139.9 million (US$18 million). Those two businesses lost HK$5.6 million (US$720,000) last year, Lerado said.

Acquisition of Lerado’s juvenile business will give the company more control over its heavy reliance on manufacturing in Asia.

“This venture will allow us to be more flexible in an increasingly changing environment,” stated Dorel President and CEO Martin Schwartz in a news release. “It has become more important than ever to be vertically integrated and be in direct control of our supply chain.”

Dorel expects to benefit from Lerado’s continuing investments in new facilities and technology, including a recently built car-seat crash test laboratory similar to those owned by Dorel in the United States and Europe.

The deal should accelerate Dorel’s strategy to grow in the Asian marketplace, an area it admits it hasn’t exploited aggressively.

The parties expect to finalize the deal in the fourth quarter. It likely won’t be accretive to Dorel’s earnings in the first year of ownership because of work needed to integrate Lerado’s facilities into Dorel’s existing operations. Schwartz said Dorel will continue to supply Lerado’s current customers.

Dorel’s juvenile category has facilities in 21 countries. Last year its sales fell 4.5 percent to US$255.3 million while operating profit fell 1.4 percent to $18.4 million. It blamed the shortfall on challenging markets in North America and Europe but said activity in Chile and Brazil were bright spots.

Dorel’s other business segments are recreation/leisure and home furnishings. Overall, the company has annual sales of US$2.4 billion and employs about 6,400.


Comments

Dorel Industries buying juvenile business of Hong Kong's Lerado Group

By Michael Lauzon
Correspondent

By Steve Toloken
News Editor / International

Published: June 16, 2014 4:06 pm ET
Updated: June 16, 2014 11:23 pm ET

Post Your Comments


Back to story


More stories

Image

China XD to catch up on Sichuan project

January 28, 2015 2:41 pm ET

Automotive compounder China XD Plastics Co. Ltd. (Nasdaq: CXDC) has been working on its fourth production base in Nanchong, Sichuan province since...    More

M&A deals in packaging hit record

January 28, 2015 1:49 pm ET

It's good to be in packaging these days. More precisely, it's good to be in packaging and decide to sell or merge.    More

Image

Sika opens negotiations to acquire Axson Technologies

January 28, 2015 12:17 pm ET

Specialty chemicals maker Sika AG has entered into exclusive negotiations with Axson SAS management and shareholders to acquire its epoxy and...    More

Image

Piovan buys majority stake in Italy's Penta

January 28, 2015 12:04 pm ET

Italian auxiliary equipment company Piovan SpA has acquired a majority stake in the Italian materials handling company Penta srl, based in Poggio...    More

Image

China's plastics industry making a shift

January 27, 2015 3:41 pm ET

China's plastic industry is in the midst of a “profound adjustment” from large-scale and high-speed growth to growth focused on quality, e...    More

Market Reports

Plastics in Automotive: Innovation & Emerging Trends

This special report newly released by PN and sponsored by The Conair Group examines current trends in the use of plastics in automotive, materials innovations and the changing landscape. It includes a review of legislative/regulatory activity impacting vehicle development and lightweighting, market opportunities & challenges for mold and toolmakers, innovative design strategies being implemented by major OEMs and suppliers, as well as a review of key indicators in Canada, Mexico, Brazil and China.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Injection Molding Market Analysis & Processor Rankings

Plastics News BUNDLED package contains our in-depth Market Analysis of the Injection Molding segment. You will gain keen insight on current trends and our economic outlook.

As a BONUS this includes PN's updated 2014 database of North American Injection Molders RANKED by sales volume. Sort, merge, mail & prospect by end market, materials processed, region, # of plants and more.

Learn more

Upcoming Plastics News Events

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events