Dorel Industries Inc. Announces US$105 Million Bought-Deal Offering of 5.5% Extendible Convertible Unsecured Subordinated Debentures
Montreal, Quebec - 9/17/2014
Dorel Industries Inc. (“Dorel”) (TSX: DII.B, DII.A) announced today that it has entered into an agreement with a syndicate of underwriters led by RBC Capital Markets and BMO Capital Markets pursuant to which the underwriters have agreed to purchase US$105million aggregate principal amount of 5.5% extendible convertible unsecured subordinated debentures (the “Debentures”) on a bought-deal basis (the “Offering”). Dorel has also granted the underwriters an option to purchase up to an additional US$15 million aggregate principal amount of Debentures, on the same terms and conditions, exercisable in whole or in part at any time not later than the earlier of the 30th day following the closing of the Offering and the occurrence of a Termination Event, as referred to below. The Offering is expected to close on or about October 7, 2014.
Dorel intends to use the net proceeds of the Offering to fund its previously-announced proposed acquisition of the juvenile business of Hong Kong-based Lerado Group, a juvenile product manufacturer in China specializing in the design and manufacture of a wide range of infant and juvenile products (the “Lerado Acquisition”).
The maturity date of the Debentures will initially be the date upon which a Termination Event (as defined below) occurs, which will be no later than December 31, 2014 (the “Initial Maturity Date”). If the Lerado Acquisition is completed prior to the occurrence of a Termination Event, the maturity date of the Debentures will be automatically extended to November 30, 2019. If a Termination Event occurs, the Debentures will mature on the Initial Maturity Date and Dorel will repay to holders the aggregate principal amount of outstanding Debentures together with accrued and unpaid interest thereon up to, but excluding, the Initial Maturity Date. In the circumstance where Dorel has not completed the Lerado Acquisition, the term “Termination Event” means the occurrence of either (i) 5:00 p.m. (Montreal time) on December 31, 2014; or (ii) 5:00 p.m. (Montreal time) on the third business day following the date of an announcement by Dorel to the public by way of press release that the agreement relating to the Lerado Acquisition has been terminated or that Dorel does not intend to proceed with the Lerado Acquisition.
The Debentures will be direct, subordinated, unsecured obligations of Dorel and will rank equally with one another and with all other existing and future unsecured indebtedness of Dorel (other than Senior Indebtedness, as that term will be defined in the trust indenture governing the Debentures).
The Debentures will bear interest at a rate of 5.5% per annum, payable in US dollars semi-annually on May 31 and November 30 each year, commencing on May 31, 2015. The Debentures will be convertible after the Initial Maturity Date at the holder’s option into Dorel Class B Subordinate Voting Shares at a conversion price of US$46.75 per share, representing a conversion rate of 21.3904 Dorel shares per US$1,000 principal amount of Debentures. Upon conversion, holders will be entitled to receive accrued and unpaid interest up to, but excluding, the date of conversion.
The Debentures will not be redeemable prior to November 30, 2017. On and after November 30, 2017 and prior to November 30, 2018, the Debentures may be redeemed by Dorel, in whole or in part from time to time, on not more than 60 days and not less than 30 days prior notice, at a redemption price equal to their principal amount plus accrued and unpaid interest, if any, up to but excluding the date set for redemption, provided the simple average of the daily volume-weighted average trading price of the Class B Subordinate Voting Shares on the Toronto Stock Exchange for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is at least 125% of the conversion price. On or after November 30, 2018 and prior to the maturity date, Dorel may, at its option, redeem the Debentures, in whole or in part, from time to time at par plus accrued and unpaid interest.
In connection with the Offering, Dorel will file a preliminary short-form prospectus in all provinces of Canada. The Offering is subject to customary regulatory approvals, including the approval of the Toronto Stock Exchange. The Debentures being offered, and the Class B Subordinate Voting Shares issuable upon the conversion or redemption of the Debentures, have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws of the United States. Accordingly, the Debentures may not be offered or sold to U.S. persons except pursuant to applicable exemptions from registration.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.
Dorel Industries Inc. (TSX: DII.B, DII.A) is a world class juvenile products and bicycle company. Dorel’s powerfully branded products include global Juvenile brands Safety 1st, Quinny, Maxi-Cosi, Bébé Confort and Tiny Love, complemented by regional brands such as Cosco and Infanti. In Recreational/Leisure, brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and SUGOI. Dorel’s Home Furnishings segment markets a wide assortment of both domestically produced and imported furniture products, principally within North America. Dorel has annual sales of US$2.4 billion and employs approximately 6,400 people in facilities located in twenty-five countries worldwide.
Caution Regarding Forward Looking Statements
Certain statements included in this press release may constitute “forward-looking statements” within the meaning of applicable Canadian securities legislation. Except as may be required by Canadian securities laws, Dorel does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from Dorel’s expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, Dorel cannot guarantee that any forward-looking statement will materialize, including the proposed Lerado Acquisition, or if any of them do, what benefits Dorel will derive from them. Forward-looking statements are provided in this press release for the purpose of giving information about Management’s current expectations and plans and allowing investors and others to get a better understanding of Dorel’s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Forward-looking statements made in this press release are based on a number of assumptions that Dorel believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from Dorel’s expectations expressed in or implied by the forward-looking statements include: general economic conditions; changes in product costs and supply channels; foreign currency fluctuations; customer and credit risk, including the concentration of revenues with few customers; costs associated with product liability; changes in income tax legislation or the interpretation or application of those rules; the continued ability to develop products and support brand names; changes in the regulatory environment; continued access to capital resources and the related costs of borrowing; changes in assumptions in the valuation of goodwill and other intangible assets; and there being no certainty that Dorel’s current dividend policy will be maintained. These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in Dorel’s annual Management Discussion and Analysis and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors outlined in the previously-mentioned documents are specifically incorporated herein by reference.
Dorel cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to Dorel or that Dorel currently deems to be immaterial may also have a material adverse effect on Dorel’s business, financial condition or results of operations. Given these risks and uncertainties, investors should not place undue reliance on forward- looking statements as a prediction of actual results.