India Chills on American Mills
June 18, 2007,
India's business press over the past year has been awash with stories of deal-making by domestic textiles companies involving foreign firms — acquisitions, controlling stakes, and partnerships.
Certainly, GHCL's acquisitions of Dan River and U.S. hospitality big Best Manufacturing were significant. But since then, GHCL's anticipated acquisition of an unidentified $1 billion U.S. home textiles retailer appears to have run off the rails. Instead, GHCL acquired a British retailer, Rosebys, and seems to be more assiduously pursuing foreign properties that would buttress its soda ash business.
Similarly, the action at Alok Industries is talking place on the shirting fabric side of its business rather than in home textiles. The acquisition of Mileta in the Czech Republic earlier this year was an apparel deal that also brought along with it some table linen capacity. Last month, Alok's sister company — embroidery operation Grabal Alok Impex — took a majority stake in 200-store U.K. retailer Hamsard and plans to open Hamsard stores in India. Growth on the home textiles side, at present, remains organic.
Earlier this year, nearly every week saw another headline out of India announcing S. Kumars' imminent acquisition of American Pacific. Then … nothing. The apparel and home textiles manufacturer went on to sign a marketing agreement with Dunhill, a British luxury brand for men.
Welspun has made no secret of its interest in expanding its product reach through acquisition, but thus far home textiles acquisitions have been limited to last year's purchase of U.K. towel heritage brand Christy. Now Welspun is reportedly mulling the construction of a bedding plant in Mexico.
Why is there so little action involving U.S. companies? One senior exec in India contends U.S. suppliers over-value themselves. When the buying frenzy began a couple years ago, he explained, nobody on either side of the transaction knew how to appropriately price such deals, and many overpaid. That is no longer the case.
Most suppliers in the U.S. industry are small, privately owned operators content to remain under the radar, conducting their portion of business and leaving it at that.
Mid-sized suppliers may be more vulnerable. Also privately held — often second- or third-generation family concerns — they are large enough to handle a few sizeable programs, which makes them targets for smaller off-shore manufacturers entering the market.
However, many overseas manufacturers are discovering and cultivating domestic expertise is key to building a sustainable U.S. business — whether that involves hiring U.S. execs and designers, signing licensing agreements, or bidding for ownership.
The pace of ownership stakes in U.S. firms may be proceeding more slowly than in Europe, but more such deals are inevitable.
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