DOREL INDUSTRIES $39.39 - Toronto symbol DII.B

DOREL INDUSTRIES $39.39 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731- 0000; www.dorel.com; Shares outstanding: 31.5 million; Market cap: $1.2 billion; Dividend yield: 3.2%) has agreed to buy 70% of Caloi, Brazil’s largest bicycle company, for an undisclosed sum.

Established in 1898, Caloi is one of the world’s oldest bicycle makers. It is also Latin America’s top-selling bicycle brand and the leader in the Brazilian market.

Caloi’s plant in the Brazilian city of Manaus is the largest bicycle manufacturing facility outside Southeast Asia.

Dorel will also use Caloi’s plant to make bicycles under its other brands, including Cannondale, Schwinn, Mongoose and GT. It will sell these bikes in Brazil and in export markets.

Caloi’s sales rose 22% in 2012, to $111.6 million U.S. Dorel had sales of $600.4 million U.S. in the latest quarter.

This purchase fits nicely with Dorel’s plan to focus on international expansion. It will gain a leading brand and will be able to use Caloi’s facilities to sell more of its other bikes and equipment throughout South America.

Dorel Industries is a buy.

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