BUSINESS

Dorel Industries buys majority stake in distributors in Colombia and Panama

09/25/2012 02:39 EDT | Updated 11/25/2012 05:12 EST
MONTREAL - Dorel Industries Inc. said Tuesday it has signed a deal to buy a majority stake in two distributors of infant and children's products in Colombia and Central America.

The purchase price was not disclosed for the companies that had US$14 million of sales last year.

Dorel (TSX:DII.B) will own 70 per cent of Best Brands Group SA in Panama and Baby Universe SAS in Colombia. The remaining 30 per cent will be held by the Sitnisky family and the current owners of the operations.

The Sitniskys are Dorel's minority partner in Chile and Peru where they operate the Infanti brand.

The acquisition is expected to be immediately accretive to Dorel's earnings.

Dorel CEO Martin Schwartz said the 130 million people in Colombia, Ecuador, Venezuela and Central America are an important emerging consumer base.

"This is another concrete step in the implementation of Dorel's geographic expansion strategy to grow in new markets with good growth potential," he stated.

"Our Chilean acquisition has been very successful. This move will energize our momentum and accelerate our market share penetration in the near future. It also expands our footprint with the Infanti brand."

On the Toronto Stock Exchange, Dorel's shares gained 22 cents at $33.46 in afternoon trading.

The company's stock has increased about 20 per cent since it announced a doubling of its quarterly dividend in August.

Analyst Leon Aghazarian of National Bank Financial increased his target price by $3 to $33 following the announcement of the "small acquisition" that continues Dorel's geographic expansion.

He estimated the purchase price at between $5 million and $15 million based on past transaction funded by cash on hand.

"We expect more acquisitions in juvenile outside of the North American market into what are perceived to be markets with high-growth potential," he wrote in a report.

Dorel is one of the world's largest manufacturers of products such as infant car seats and bicycles. It also makes ready-to-assemble furniture.

Its brands include Safety 1st, Quinny, Cosco and Maxi-Cosi, while it also sells bikes under the Cannondale, Schwinn, GT, Mongoose and IronHorse brands.