South Geelong, July 5, 2006-- Australian rival Godfrey Hirst may yet come to Feltex's rescue if the struggling carpet-maker is honest about its prospects, according to a source close to the Australian company.
According to a report in the Dominion Post, any rescue would probably depend on how much pressure Feltex's bank – the ANZ – put on it to stitch up a deal with an investor, the source said.
"Many commentators would say that the (Feltex) board has an unreasonably optimistic view of where the company is at. But if Feltex's view has changed or if there is sufficient pressure from their bank to cause people to be a bit more realistic, Godfrey Hirst might look at it again if it was invited to. But Godfrey Hirst doesn't know to what extent the bank is really involved," the source said.
"If they (the bank) are saying you must do a deal then circumstances might change a little bit, attitudes around value might change a bit."
Heavily indebted Feltex had been in talks with an unnamed prospective investor, believed to be Talley's Fisheries, but this week the prospect evaporated.
ANZ has given Feltex a three-month reprieve after the carpet firm breached terms of its loan facility.
It is understood that the bank is taking a hands-on role in overseeing the management of Feltex.
Godfrey Hirst proposed a reverse takeover with Feltex last year, but in February Feltex said the offer was inadequate and not in the interests of shareholders.
The two could not agree on the relative values of each company. Godfrey Hirst has since sold its 8.7 per cent stake in Feltex.
"Over the years Godfrey Hirst has made a number of approaches, some on the record, some more informal (to Feltex)," the source said. "But they haven't really managed to reach any common ground. Feltex has always thought there was something better on the horizon."
Another industry source said the reverse takeover of Feltex by Godfrey Hirst would have created a company with a share value of more than 80 cents.
The merger would have had synergies of at least $20 million but would also have meant plant rationalization and more job losses, the source said.
The dominant force in the company was chief executive Peter Thomas, not chairman Tim Saunders.
Mr. Thomas has been associated with Feltex for several years. He was a director of Feltex when Credit Suisse First Boston Private Equity owned it and sold it to the public in 2004 for a big profit.
Feltex's prospectus for the offering of shares to the public says Mr. Thomas was entitled to part of the proceeds of the sale of Credit Suisse's shares to the public.
On Tuesday Mr. Saunders said the company had no intention of making any changes to management or the board.
"We have made significant changes to management. That doesn't mean we won't make more changes. But we're actually pretty comfortable with the way this management team is moving ahead. From the board's point of view, we've basically just got our nose to the grindstone and we're just keeping pushing along," Mr. Saunders said. "At some stage, when we're out of this mire, we will review the position (of the board) and there may be discussions then."
He understood the frustrations of investors.
Mr. Saunders said, "We're all investors ourselves and we're equally frustrated."
