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

By Michael Lauzon
Correspondent

By Steve Toloken
Staff Reporter / Asia Bureau Chief

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
Staff Reporter / Asia Bureau Chief

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

Canadian mold maker Thibault adding to new operation in Mexico

August 27, 2014 3:19 pm ET

Canadian mold maker I Thibault Inc has purchased an established Mexican company, Tecnimoldes SA de CV, for a seven-figure-dollar-sum and renamed it...    More

Image

Design Stories: Young designers showing the way in adaptive design

August 27, 2014 12:12 pm ET

Amanda Bolton, then 19, decided to change her major at the University of Cincinnati from fine arts to industrial design, creating products for people ...    More

Image

Canadian thermoformer ICI gets new financial backing

August 26, 2014 3:11 pm ET

Innovative Composites International Inc. (ICI) will get a $1.5 million infusion in the form of a loan and equity funding to cover a corporate...    More

Image

Nova expanding PE research center

August 26, 2014 1:36 pm ET

Nova Chemicals Corp. has broken ground on an expansion of its polyethylene research center in Calgary, Alberta.    More

Image

Kayak maker Confluence taking on a broader outdoor products business focus

August 26, 2014 12:54 pm ET

Canoe and kayak rotational molder Confluence Watersports Co. has a new owner and a new name — Confluence Outdoor Co. — that reflects a bro...    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report analyzes economic and market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as growth strategies being implemented by thermoformed packaging companies.

Learn more

Pipe, Profile & Tubing Extrusion in North America 2014

U.S. demand for extruded plastics is expected to grow by 3 percent in 2014, with PVC remaining the largest segment.

Plastic pipe will post the strongest gains through 2018, continuing to take market share from competing materials in a range of markets.

Our latest market report provides in-depth analysis of current trends and their financial impact on the pipe, profile and tubing extrusion industry in North America.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

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

More Events