A Suitor for Cervelo

The owners of bicycle fabricator Cervelo Cycles have entered a process which may result in a sale of their highly regarded bicycle company to Dutch finance and transportation conglomerate PON.

The Cervelo website released a brief statement announcing both a financing arrangement, and a period during which PON will have the exclusive right to perform its due diligence and consider the purchase of Cervelo Cycles.

PON has experience as a finance company. It owns, for example, 40 percent of the Dutch auto leasing market. In striking this financing deal, Cervelo inserts PON as a replacement for an existing finance partner.

The Dutch company is also familiar with the bicycle market. It owns Derby Cycle AG, the parent company of Raleigh Bicycles. Under the Derby umbrella PON owns, among others, the bike brands Raleigh and Focus. PON separately acquired Dutch bike brand Gazelle.

None of these brands PON now owns sport a headbadge equal in polish to Cervelo. While Raleigh was a well-respected pro bike brand in ages past, and Focus has endeavored to become one, Cervelo would certainly be the jewel in the crown, if high-end is the metric.

In this sense, the deal would bear some resemblance to Dorel Industries' purchase of premium bike brands Cannondale and Sugoi. Dorel, a Canadian company, championed mass market as a distribution channel for Schwinn, GT and Mongoose—brands it owned prior to purchasing Cannondale—and there was much fear Dorel would downscale Cannondale and abandon the LBS model, or at least augment it with mass market. But those fears were not realized. Indeed, Cannondale seems to have flourished as a brand under Dorel's ownership, and it continues to be sold only through IBDs.

Likewise, while message boards—including Cervelo's own—voice fears that a PON ownership would mean a dumbing down of the brand, it's extremely unlikely that PON would downscale what would be the "Porsche" among the bicycle brands they would now own. The PON company understands the multi-tiered strategy, having a long history selling the sorts of German cars that form these tiers: Volkswagen, Audi and Porsche.

PON is a large company but is still family owned. The Pon family was VW's first Dutch importer and car seller, in 1947. Porsche was added to the stable of cars the family sold a year later. The Pon family introduced VW to the U.S. market.

PON's foray into the bicycle business has been recent and decisive. It purchased Gazelle bicycles in July of 2011. It followed this up with its purchase of Derby only a month later.

While the Dutch company's interest in cycling is recent, it does have distant roots in cycling. The company was formed in the late 1800s, when bicycles and the new introduction of motor driven bicycle (to be the motorcycle) were the predominant mechanical means of individualized transportation. The Pon family imported Opel bicycles and motorcycles into the Netherlands, and it also made bicycles under its own label.

If PON can be construed as a company centered around individualized transportation, then bicycles seem a thematic fit. Recent statements attributed to the company suggest an interest in the growing segment of electric bicycles, such as those made by Gazelle and Derby. According to international law firm De Brauw, et al, who advised PON during its bid for Gazelle, PON has an interest in the "growing demand for environmentally friendly modes of transport."

The PON company's founder and patriarch, Mijndert Pon, branched into selling Opel bicycles and motorized bicycles in the early 1900s. The company's current interest is in bicycles and their electric variants. It's hard to miss the similarity.

The deal just announced does not guarantee the sale of Cervelo to PON, rather that a sale would follow only after PON's successful kick of Cervelo's tires, and its look under the company hood. But recent history suggests PON will not dilly-dally. Its purchases of Gazelle and Derby took place at lightning speed.