Wellington, New Zealand, August 8, 2006--Graeme and Craig Turner, the principals of bedding company Sleepyhead, got the go-ahead today to check Feltex's books, but that provoked a veiled threat from Godfrey Hirst Carpets it might pull its rescue plan, according to the New Zealand Press Association.
The troubled New Zealand carpet maker said today it would permit the rich-list brothers to conduct due diligence, with a view to stitching up an alternative rescue plan for the debt-ridden company.
Feltex said that despite granting permission, it continued to support the deal agreed with Godfrey Hirst on August 1 in the absence of a superior offer.
The Australian company has agreed to buy Feltex for $141.8 million, in a deal that would give Feltex shareholders a maximum of 12c a share.
Godfrey Hirst said today's announcement would "create unnecessary uncertainty for employees and other stakeholders."
Its financial director Jim Walsh denied that was an implied threat.
He told NZPA Godfrey Hirst's offer was fair and fully priced. Until the Sleepyhead pair entered the fray, Feltex stakeholders at least had some certainty.
"With the board now entertaining another group, we don't know what their proposal is going to be, if there is one at all. We don't know what level of funding they will arrive with, and we are not sure where that will leave the stakeholders.''
However, the Turners said they hoped to have their due diligence as close as possible to August 21, the date Godfrey Hirst hopes to have its homework done.
The Turners said they hoped to have a detail proposal to shareholders in late August or early September.
Craig Turner said the brothers had been overwhelmed by support for their plan.
"The business itself is a good one and we want to stop another `fire sale' of a New Zealand company,'' he said.
The brothers would underwrite a third of an estimated $35 to $40 million rights issue needed to right Feltex, provided other well-heeled investors put up money on similar terms.
They want Feltex to remain listed so shareholders can participate in any recovery, should it occur.
Under the Godfrey Hirst plan, due to be considered by shareholders next month, shareholders would be forced to sell.
Feltex is reported to be trading profitably, has a strong order book and is servicing its $128m of debt.
Under the Godfrey Hirst rescue plan, shareholders would get between 9c and 12c a share in two instalments--the first, of up to 9c, after settlement in October, and up to another 3c next year when certain warranties expired.
Feltex shares were floated at $1.70 in 2004, so the deal would give shareholders a loss of up to $240m.
Feltex shares firmed 0.1 of a cent to 12.1c today. They traded as high as 12.7c.
The Turner brothers, who share a $70m family fortune, according to the NBR Rich List, want Feltex to issue preference shares that would have priority if the company was wound up.
Sleepyhead employs 600 staff with over a quarter of them in Australia.
Feltex said it was free to look at alternative proposals until a September shareholder meeting to consider the Godfrey Hirst offer. Godfrey Hirst would get a $1m break-fee if its scheme was not accepted.
Godfrey Hirst is expected to get considerable benefits from knitting the two companies together with some rationalization of plants on both sides of the Tasman expected. It said today it was uniquely placed to meet the challenges facing Feltex.
