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Burlington’s Bonanza: $579M Buffett Offer Ignites Bidding Battle

Burlington Industries said Tuesday that it has agreed to be acquired by Berkshire Hathaway, but bankruptcy investor king Wilbur Ross says “not so...

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Warren Buffett Berkshire Hathaway

Warren Buffett, Berkshire Hathaway

Photo By JA GIORDANO/CORBIS SABA

NEW YORK — Suddenly everybody loves Burlington Industries — including the Sage of Omaha.

The U.S. textile industry might be a shadow of its former self with fabric producers terrified of a flood of imports from China and deflation now a fact of life. But Berkshire Hathaway chief executive Warren Buffett is nothing if not counter-cyclical in his investment strategies.(Remember his warnings about the dot-com boom?) Now he’s going as low tech as possible — on Tuesday, Berkshire and Burlington executed a definitive agreement for Berkshire to acquire Burlington in a transaction that would put about $579 million in the pockets of the bankrupt mill’s creditors.

But Buffett isn’t alone in his attraction to Burlington. Also squaring off in what could become a battle is bankruptcy baron Wilbur Ross. Complicating matters further, Robert Lee of Sheffield Merchant Banking, the financial adviser to Burlington’s unsecured creditors’ committee, believes that the sum of Burlington’s pieces could possibly bring in more to creditors than the company kept in its entirety.

The clash emerged Tuesday when Greensboro, N.C.-based Burlington chose Berkshire Hathaway as its white knight. Under the Berkshire agreement, secured creditors would be paid in full, while unsecured creditors would get a return of between 34 and 35 percent on their claims in the form of cash and certain other assets. Existing shareholders would see their shares extinguished.

Burlington, which filed its Chapter 11 petition in Delaware on Nov. 15, 2001, would become a wholly owned subsidiary of Berkshire, assuming there are no higher offers during a mandatory bankruptcy court auction.

A Burlington break-up could deplete its workforce of about 7,600 even further, and add to the considerable woes of the U.S. textile industry, which last year watched more players succumb to bankruptcy and its employment ranks shrink an additional 21,000 to 425,000.

Buffett said in a statement: "Only the very strong will survive in the textile industry — strong in management, strong in worker skills and strong in financial strength. Burlington brings the first two resources to a successful reorganization; Berkshire brings the latter. Burlington will go forth as a company with no debt, talented and dedicated management, and a workforce second to none. It will be a company designed for success."
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