Canadian Consumer goods giant Dorel Industries has signed an agreement to acquire the juvenile business of Hong Kong, China-based Lerado Group, one of the largest juvenile product manufacturers in China.

Lerado specializes in the design and manufacture of a wide range of infant and juvenile products and is a subsidiary of Lerado Group (Holding) Company, a publicly traded company listed on the Hong Kong, China Stock Exchange.

The purchase price is HK$930 million (about US$120 million), subject to adjustments and due on closing.

"This is a sound investment in our future to ensure that going forward we control our own destiny. This venture will allow us to be more flexible in an increasingly changing environment. It has become more important than ever to be vertically integrated and be in direct control of our supply chain," Dorel president and chief executive officer Martin Schwartz said in a statement.

"Dorel has built its juvenile business into a global player by focusing on several key pillars; great quality products, diversity of strong brands and a strong distribution model. Now with these additional excellent facilities in Asia, our strategy to maintain and grow our leadership in the industry is further strengthened," added Jean-Claude Jacomin, president and CEO of Dorel Juvenile Group.

Schwartz emphasized that while Dorel will operate its own manufacturing network, it will continue to purchase other juvenile products from existing Asian suppliers with whom relationships have been built over time.

The purchase will provide Dorel with its first company-owned factories in Asia. It is expected that the current management overseeing the facilities will remain with Dorel and will be joined by additional Dorel employees.

They will work closely with existing product development teams at the company's various juvenile divisions, as well as with existing staff at Dorel's quality control and customer support offices located throughout China. Dorel will benefit from Lerado's consistent investment in new facilities and technology, including a recently constructed car seat crash test laboratory similar to those owned by Dorel in the U.S. and Europe.

Beyond enhanced manufacturing capabilities, Lerado has established a modern research and development centre in Taiwan, China which will complement Dorel's existing teams. It is also expected that the acquisition will accelerate the company's plans to grow in the Asian market place, an area of opportunity that thus far has been under exploited.

The transaction is subject to regulatory review as well as approval by the shareholders of Lerado and it is anticipated to close in the fourth quarter. The acquisition is not expected to be accretive to earnings in the first year of operations as work will be required to integrate these new facilities into existing operations.

The acquisition includes four new extensive facilities, of which three are based in China with one based in Taiwan, China. The total assets acquired encompass over 2.5 million square feet of modern production, research and development and testing resources as well as office space. Included are two fully integrated campuses in Zhongshan, China housing the headquarter factory and offices, as well as a number of independent buildings for production and employee accommodations. There is also a recently built factory in Huang Shi, China.