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Slow and steady wins the race

Jennifer Negley -- Home Textiles Today, February 26, 2001

The news that Springs and a private equity firm intend to buy out all other shareholders for $466.4 million and take the company private serves as a reminder that the industry is not necessarily the dinosaur it sometimes appears to be.

The news should serve as a big shot in the arm for the industry, particularly for the public companies that have seen their stock prices plummet over the past 12 months. Wall Street has done a fairly thorough job of writing off the home textiles industry. Many firms have abandoned coverage of the industry and sent their analysts elsewhere, one of the more notable examples being Prudential Securities, whose domestic textiles analyst had been steeped in the industry for more than two decades.

Now here comes Heartland Industrial Partners with an investment of $225 million and a corporate strategy to invest in, build and grow industrial companies in sectors that offer long-term growth potential. That's right: long-term growth potential-not a phrase that's been bandied about much lately in association with U.S. textiles production.

It's the kind of endorsement the industry solely needs.

Heartland also invests in industrial segments it sees as ripe for consolidation-a sure sign that the level of deal making at Springs is likely to be ratcheted up by several notches.

Which should make the sport of textile watching very interesting in the coming months, particularly as it concerns Springs vs. WestPoint Stevens. WestPoint, the larger of the two by about $80 million in annual sales, has long pursued the strategy of driving top line sales to grow the company. In 2000, it purchased CMI Industries' Chatham blanket business, giving it the capacity to produce woven cotton, acrylic and woolen blankets for the Ralph Lauren Home. WestPoint also cinched the deal to produce Ralph Lauren's bed pillows, mattress pads, feather beds, down comforters and coordinated bedding when the designer's license with Pillowtex officially expires this year. And WestPoint grabbed the Disney licensed business, which Springs bowed out of after a quarter century of production.

Under the new recapitalization deal with Heartland, Springs will need to take a page from WestPoint's book and pursue top-line growth more assiduously to deal with its debt. And that's going to require the sort of rapid growth that comes from acquisition.

Springs has historically proceeded more cautiously. The Close family members, descendants of the company's founders, hold 44 percent of the common stock and control roughly 73 percent of Springs' voting power. With the family's long-term interests at stake, the company has often moved more deliberately, and Springs has sometimes been drubbed for it.

Ironically, the years of judiciously controlled growth wound up positioning Springs as the more attractive investment candidate for Heartland. And whereas the more aggressive WestPoint Stevens spent a good chunk of 2000 looking for a buyer and a means to go private, it is ultimately Springs that will travel that road.

In this matter, anyway, the tortoise won the race.

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