The best laid plans ...
May 12, 2003-- Home Textiles Today,
You'd be tempted to call Springs Industries' impending acquisition of ailing rival Pillowtex the worst kept secret in the home textiles industry — if the industry weren't so replete with gossip on a daily basis. So let's call it the most recent worst-kept secret in the industry.
What broke it open, ironically, is the same force that is working very hard to break the deal apart — the Union of Needletrades, Industrial and Textiles Employees. Just when the industry's agonizing wait for a Springs/Pillowtex announcement seemed to be coming to an end, UNITE popped up with the news that two other companies had expressed an interest in bidding for Pillowtex.
The question that arises now is whether the emergence of bidders #2 and #3 — whose identities have not been released — will simply delay the Springs deal, or scuttle it altogether.
Springs has gone after the Pillowtex brands before. The company has been on the losing end of bidding in the past. But it has also walked away from the table in more recent years, operating under the correct assumption that time would continue to drive the price down on a deal.
However, to say this is "a big deal" for Springs is putting it mildly. The company's mandate since becoming private in late 2000 has been to grow sales to the $4 billion to $5 billion range, and then go public again. The timetable for the project was set a five years — putting Springs at about the halfway mark today.
Its acquisitions since then of an overseas sourcing operation, Beaulieu Rugs, the Burlington House bedding and window business, and earlier this month, Charles D. Owen Manufacturing take Springs to above the $2 billion mark.
Acquiring the $937 million Pillowtex business would leapfrog Springs ahead toward its goal, even though the company would probably lose some former Pillowtex programs as retailers rebalance their supplier roster.
If the deal falls through, Springs will need to do a lot more shopping to hit its number. That will come as difficult news for the company's partner in privatization, private equity firm Heartland Industrial Partners — of which financier David Stockman is a lead partner. Stockman is reportedly keen to keep the momentum going — which is usually the way it goes with financial investors.
But the larger question is what will become of Pillowtex without Springs. If any of its rivals is still able to or interesting in acquiring it, their plans would almost certainly involve shutting down most of the manufacturing operation — the sticking point for UNITE regarding the Springs deal. And it's questionable how long a pure investment firm could keep the operation going as is.
As this column goes to press, both Springs and Pillowtex have kept mum on the matter. However it all shakes out, jobs will be lost. The real question is how much of the business can be preserved and for how long?
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