Dorel sells State Street facility in leaseback agreement

Dorel Juvenile Group has sold its facilities on State Street in Columbus to an investor group including company officials.

The Quebec based company announced in February that the $30 million deal is meant to raise operating capital and reduce debt. According to the announcement, the transaction is a sale-leaseback arrangement for the facility which includes factory and warehousing functions. The company will pat $2.9 million in rent for the building on a 10-year- lease, with the option to renew for two five-year terms.

The company says that it will use $8 million of the sale to pay down debt, and use the rest to fund ongoing operations. The sale is meant to finance the growth of its Juvenile segment and the turnaround of its Home segment, an initiative announced earlier this year.

The company said that several directors and executive officers at Dorel have an ownership interest in the purchasing company.

Dorel announced that the furniture supplier industry is struggling “with supply chain uncertainty, inflation and higher interest costs” and consumers “have de-prioritized spending on home furnishings.”

In the company’s financial reports released yesterday, Dorel reported a fourth quarter loss of $73 million dollars on revenue of $326.8 million. The revenue was down 6.8 percent from the same quarter a year ago.

You can read Dorel’s Fourth Quarter 2024 report here: https://www.dorel.com/blogs/news/dorel-reports-fourth-quarter-and-2024-year-end-results

Dorel’s February announcement:

Dorel Announces Financing Transaction
Montreal, Quebec – February 21, 2025
Monetization of Company-owned factory in Columbus, Indiana
Montréal, February 21, 2025 — Dorel Industries Inc. (TSX: DII.B, DII.A) announced today that it has entered into a sale-leaseback transaction for its factory and warehousing facility in Columbus, Indiana. The gross proceeds to Dorel from the sale will be US$30 million, of which approximately US$8 million will be allocated to reduce existing debt, with the balance designated for funding the Company’s ongoing operations. The lease has an initial term of ten years and may be renewed at the Company’s option for two renewal terms of five years each. The initial annual rent is approximately US$2.9 million, subject to annual increases. The obligations of the lessee Dorel Juvenile Group, Inc. are not guaranteed by Dorel Industries Inc., its parent company. This transaction is part of the Company’s initiative to finance as announced on January 30, 2025. The Company is diligently exploring additional opportunities to further enhance its financial position.

Each of Martin Schwartz, Jeffrey Schwartz and Jeff Segel, directors and executive officers of Dorel, and Alan Schwartz, an executive officer of Dorel, has an ownership interest in the purchaser/lessor of the facility in Columbus, Indiana. As such, the sale-leaseback transaction constitutes a “related party transaction” for Dorel under Canadian Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”). Dorel’s Board of Directors, for the purposes thereof comprised solely of Dorel’s four independent directors, approved the transaction and determined, acting in good faith, that (i) Dorel is in serious financial difficulty; (ii) the transaction is designed to improve Dorel’s financial position; (iii) the transaction is not subject to court approval and no court has ordered that the transaction be effected under bankruptcy or insolvency law or under applicable corporate law; (iv) Dorel has four independent directors in respect of the transaction; and (v) the Board of Directors, acting in good faith, determined, and all of Dorel’s four independent directors, acting in good faith, determined that clauses (i) and (ii) above apply to the transaction and that the terms of the transaction are reasonable in Dorel’s circumstances. As a result, the sale-leaseback transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 which generally apply to a “related party transaction”. In making its determination, the Board of Directors relied in part on a report from a third party specialized in real estate. The Board of Directors also relied on advice from its independent legal advisors in making the foregoing determinations.

Since then, the industry has struggled with supply chain uncertainty, inflation and higher interest costs which means consumers have de-prioritized spending on home furnishings. This has in particular impacted traditional North American furniture suppliers and retailers, resulting in a number of significant industry bankruptcies. Although the market is smaller today than it was during the pandemic, the current industry dynamic presents an opportunity for Dorel to succeed by focusing on its core competencies and its long-term relationships with retailers that sell moderately priced furniture. This requires adjustments to the Dorel Home business model and a reduction in overall footprint to achieve profitability.

Dorel will file a material change report with respect to the transaction on SEDAR+. Dorel will not file the material change report at least 21 days before the closing date of the transaction as the terms and conditions of the transaction were only recently finalized. In Dorel’s view, the shorter period is necessary to permit Dorel to close the transaction on a timely basis in order to improve its financial position.