Buffett Gets Burlington
Greensboro, NC & Omaha, NE, Feb. 11--Burlington Industries and Berkshire Hathaway have executed a definitive agreement for Berkshire to acquire Burlington for $579 million in cash.
The transaction beat out an offer from buyout investor Wilbur Ross and continues Berkshire's recent expansion into textiles. The firm purchased bankrupt underwear maker Fruit of the Loom for $835 million last year.
The $579 million purchase price will be paid to Burlington’s creditors. Burlington filed Chapter 11 in 2001. Following emergence from Chapter 11, Burlington will operate as a wholly owned subsidiary of Berkshire Hathaway. No reference in the announcement was made to the disposition of Burlington’s carpet unit.
Under the proposed plan, Burlington's secured creditors would be paid in full. Its pre-petition unsecured creditors would receive cash and certain other assets estimated to be 34% to 35% of their claims.
All common shares of Burlington would be canceled with no payment. Burlington would emerge with no debt, other than ordinary course liabilities and certain pre-petition obligations, having repaid the majority of the $1.1 billion of liabilities it had prior to its bankruptcy filing, and eliminating the balance through the bankruptcy process.
In discussing the transaction, Burlington’s chairman and CEO George W. Henderson, III said it was a very positive outcome for the company, its employees and creditors. He said that over the last year the company’s efforts have increased its value and allowed it to achieve a significant level of return for its creditors despite extraordinarily challenging conditions in the industry and the capital markets.
Henderson said that in several recent cases, other companies have emerged from bankruptcy with excessive debt only to be faced with renewed problems. The opportunity to be totally debt free and having made considerable progress in the company’s globalization efforts, puts it in a unique position to take full advantage of its capabilities and compete successfully in a rapidly changing textile business.
The chairman of Berkshire Hathaway, Warren E. Buffett, said that only the very strong will survive in the textile industry--strength in management, in worker skills and in financial strength.
He said that Burlington brings the first two resources to a successful reorganization; Berkshire, he said, brings the latter.
The companies said they expect the closing to occur toward the end of June.
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