TORONTO (BRAIN) — Auctionmaxx, a Canadian liquidation specialist, has agreed with a court-appointed appointed receiver to acquire about 2,260 Reid bikes from Reid’s Canadian distributor, Vellend-Tech Inc. Velland-Tech entered receivership this spring after failing to make payments on a bank credit line.
The purchase agreement must still be approved by a judge at a court hearing next Tuesday.
Reid — a brand founded in Australia and now based in the United Kingdom — will appoint a new Canadian distributor soon, Reid Group CEO Rob Akam told BRAIN. In the meantime, Reid is handling Canadian dealer and consumer customer service from its headquarters, shipping repair parts from China to Canada because Reid does not have access to parts Vellend-Tech held at its Toronto warehouse. Vellend-Tech had more than 100 Reid dealers in Canada.
An attorney for Vellend-Tech and its owners, Robert and Martin Vellend, did not respond to an email from BRAIN.
Vellend-Tech, in business since about 1990, was formerly known as Veltec Cycles (Canada) Inc. and has distributed brands including Eddy Merckx, Ridley, Sidi, FLR, Crono, Catlike Helmets, Velotoze, Vredestein, Sportbalm, Velox, Fix Tools, Karhu, Yoko and Exel.
Vellend-Tech entered receivership in May, a year after defaulting on a CA$975,000 ($739,000) credit line with Royal Bank of Canada. RBC extended its loan by 12 months but the distributor was unable to make payments and RBC asked for a receiver to be appointed.
As of April 22, Vellend-Tech owed RBC $1,351,231.82 plus accruing fees and interest.
On July 20, the appointed receiver, msi Spergel inc., agreed to sell Vellend-Tech's assets to Auctionmaxx for a flat amount, which is being kept confidential. According to court filings, RBC supports the agreement with Auctionmaxx, although the proceeds are not expected to cover the full debt owed to the bank. Besides the Reid bikes, Auctionmaxx agreed to acquire some bike shoes, parts, shelving, scooters, ski equipment and clothing in the Vellend-Tech warehouse.
An Auctionmaxx representative told BRAIN the company will not comment on the agreement until after it is completed. Auctionmaxx regularly holds trade and consumer auctions; it currently is auctioning bike products including Schwinn and Mongoose bikes and Smith cycling sunglasses.
Reid moving on
Akam said Reid will announce a new Canadian distributor in a matter of weeks. Although the new distributor will not have new Reid bike inventory until the spring 2024 season, the distributor has agreed to stock Reid small parts and handle Canadian consumer and dealer customer service immediately, he said.
Akam said he’s not overly concerned about the market impact of the 2,260 bikes expected to be auctioned by Auctionmaxx. “Everyone is on clearance and discount now anyway,” he said, noting that the auctioned bikes are model years 2020 and 2021, while the upcoming model year 2024 bikes will be significantly updated. He said he had received little communication from Vellend-Tech or the receiver and would have tried to acquire the inventory if the company had been given an opportunity.
Akam said Reid generally does not offer credit to its distributors, who buy directly from the manufacturer on 30- or 60-day FOB terms. That’s one way Reid has remained lean and able to offer low retail prices, he said. Reid made an exception for Vellend-Tech several years ago when the distributor told Reid it was unable to pay for bikes in port in Canada because of a growing accounts receivable balance. Rather than ship the bikes back to Canada, Reid released them to Vellend-Tech, which paid off all but about $80,000 of the debt by the time it entered receivership, Akam said.
“That (the $80,000) is not going to materially harm the company, but it’s the first time we’ve had bad debt in over 9 years of Reid Bike. Lesson learned,” Akam said.
Nevertheless, Akam said that on June 30 Reid concluded one of its best fiscal years ever in revenues and profits, second only to its 2021 fiscal year. Besides the Reid-branded bike business, the company designs and builds bikes for several other brands at contracted factories in China, Cambodia and soon in Vietnam.
Reid bikes are distributed in the U.S. by Olympic Supply Co. and Hans Johnsen Co.
