Dan River Purchase A Milestone for GHCL
January 9, 2006,
Noida, India — Aiming to transform itself into one of the biggest home textiles players in India, Gujarat Heavy Chemicals (GHCL) purchased 90 percent of Dan River stock last week for $17.5 million plus assumption of $76 million in debt.
“I think you're going to have 10 to 15 global suppliers in the future,” commented Barry Shea, Dan River's president & CEO. “This is how retailers want to work today — they want the advantages of low-cost distribution and manufacturing, quick replenishment, speed to market and great looking stuff.”
Similarly GHCL plans to expand its spinning capacity from 85,000 spindles to 140,000 spindles in the next two years. The company is also nearing completion on a state-of-art manufacturing facility at Vapi, India, that is slated to start production by March. After that point, GHCL will become the first company in India to have integrated production facilities and rank in the top three Indian home textiles players.
The buyout became effective Jan. 2 and GHCL is expected to acquire the remaining Dan River shares in 30 days' time, according to a filing with the U.S. Bankruptcy Court for the Northern District of Georgia, Newnan Division. Key to the acquisition, per GHCL, is the company's belief it can cut losses and integrate its own low-cost sourcing capabilities.
A filing with the Bombay Stock Exchange said the equity cost will be funded through recently concluded FCCB (Foreign Currency Convertible Bond) issue proceeds, while the existing debt will be refinanced. GHCL accomplished the buyout by paying several secured creditors' groups who held equity in Dan River a “heavily negotiated, arms-length price of $0.085 per share,” according to bankruptcy court documents.
“It's a good thing,” Shea told HTT in a Thursday morning interview. “They have a vision of putting together U.S. marketing and design with low-cost Asian manufacturing. They bring a strong balance sheet and the ability to become more efficient. They are very smart, knowledgeable people who are in textiles, chemicals, call centers, etc. Their vision for us is to become bigger and better.”
According to GHCL's prepared statement with the Bombay Stock Exchange, Sanjay Dalmia, company chairman, stated: “This acquisition provides us with an ideal opportunity to leverage Dan River's global platform and a renowned global brand in order to make GHCL one of the dominant players in the home textile space globally.”
Shea continued, “This transaction provides Dan River with the financial and operational resources required to succeed and thrive in the global textiles market. The combination of superior design capabilities, well-known brands, low-cost manufacturing and a world-class supply chain will allow Dan River to leverage its strengths in the U.S. market and further expand its operations internationally.”
Dan River has $250 million in annual sales and a sales and distribution network that caters to such retailers as JC Penney, Linens 'n Things, Wal-Mart and Bed, Bath & Beyond. The company filed for bankruptcy in March 2004, emerged from Chapter 11 in February 2005 and shut down its apparel fabric division in December 2005.
Dan River's remaining U.S. facilities include one greige goods mill and a finishing plant. It is expected that only the Brookneal, N.C., cut-and-sew and finishing plant will remain. Upwards of 60% of the company's products are sourced globally with plans to shift that percentage to 80% by year's end, according to company executives.