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Accell Group sells loss making US business

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Tom Zirbel riding the Diamondback Serios

Accell Group has reached agreement with private equity firm Regent for the sale of its loss making US business including the worldwide registrations of the brands Diamondback, Redline and IZIP. In addition, Accell and Regent agreed on an exclusive 2-year US distribution partnership for the international Accell brands Raleigh, Haibike and Ghost.

The total consideration amounts to US$1 and a maximum contingent consideration (potential earn out) of US$15 million. The US business was effectively transferred on August 6, 2019.

Following the sale of its Canadian brand registrations announced on July 12, 2019, today’s announcement completes the strategic review of the North American operations and allows Accell to focus on its European (core) business.

Ton Anbeek, CEO Accell Group said “With this announcement, we have completed the strategic review of our North American business. This allows us to eliminate the profit dilution, while we can continue to distribute our global brands to the US and benefit from the growing demand for e-bikes.

“We look forward to working with Regent as our US distributor and as global supplier of its sports brand Mavic.”

He continued, “The completion of the strategic review results in a one-off charge which we will absorb in H2 2019. We are glad that we can now put our full focus on accelerating growth of our European core business.”

Accell Group summarised the overall financial impact of the completed strategic review:

  • The estimated H2 impact of the sale of the US business (-/- €46 million in EBIT and -/- €10 million in cash) covers the transfer of US trade working capital, main contractual obligations, the majority of personnel and the brand registrations for Diamondback, Redline and IZIP for a cash consideration of US$1. It also covers direct and indirect transaction costs (e.g. advisory and liquidation costs) as well as the loss on the intended sale of the US assets of Beeline. The potential benefit of the earn out arrangement, set as a % of EBIT in 2022-2026 with a maximum of US$15 million cumulative (contingent consideration), is excluded from the above EBIT and cash estimates.
  • As announced previously, the sale of the Canadian brand registrations is estimated to contribute €14 million positive in EBIT and cash.
  • With the divestment of the US business and the earlier sale of the Canadian brand registrations, the North American operations can be considered as substantially liquidated, which results in a reclassification of the translation reserve of €8 million (loss) to the Accell Group income statement.

The total overall 2019 impact of the steps taken in the North American business strategic review are estimated to have an effect of around -/- €40 million on EBIT and around + €4 million on cash. These effects will be absorbed in H2 2019 while the company continues to operate within current bank covenants.

Next to this and based on a first assessment, Accell currently expects qualification for the requirements of the Dutch liquidation loss facility to be probable. If Accell qualifies this could result in a potential tax benefit of €15-20 million.

In H1 2019, the North American operations reported an operating loss of €11 million which included €2 million of allocated corporate fees. With the agreement reached, the profit dilution of the North American business is eliminated from August 6 onwards.

In Europe, Accell Group claims the position of market leader in the bicycle market measured in turnover. Accell Group’s best known brands are Haibike (Germany), Winora (Germany), Batavus (Netherlands), Sparta (Netherlands), Koga (Netherlands), Lapierre (France), Ghost (Germany), Raleigh and Diamondback (UK, US, Canada), Tunturi (Finland), Atala (Italy), Redline (US), Loekie (Netherlands) and XLC (international).

Accell Group and its subsidiaries employ approximately 3,000 people in 18 countries worldwide. The company has production facilities in the Netherlands, Germany, France, Hungary, Turkey and China. Accell Group products are sold in more than 70 countries. The company’s head office is located in Heerenveen (the Netherlands).

www.accell-group.com

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