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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...

"The bonds are trading around 33 cents [on the dollar] and Buffett’s offer is 35 cents, which [means there is] no premium on his bid for the unsecured claims in order to take control of the company. Our perspective is that the value put forth by the Buffett proposal is inadequate," the banker said.

Lee, who expects that higher offers could be forthcoming, noted that, depending on the bidding process, the sum of Burlington’s parts may be greater than its whole valuation per Buffett. He also expects the unsecured creditors committee to file an objection with the bankruptcy court, seeking a court order requiring Burlington to "pursue a proper divestiture process."

Should Berkshire ultimately get the winning nod from the bankruptcy court, Burlington will be the latest in a recent series of purchases for the investment firm run by the sage of Omaha.

Last September, kids were added to Berkshire’s portfolio when the fund acquired children’s clothing maker Garan Inc. in a cash deal valued at $270.6 million. Garan shareholders were paid $60 a share, a 6.8 percent premium.

Also last year, in January, Berkshire received Delaware bankruptcy court approval to buy bankrupt Fruit of the Loom for $835 million. Secured creditors received 100 percent of the equity in the reorganized FTL, as well as $300 million in unsecured debt. The return to unsecured creditors is in the range of $62.6 million, or 7.5 percent of the $835 million purchase price.

Other outright purchases now under the Berkshire umbrella include, in July 2000, Ben Bridge Jeweler, a 65-store West Coast retailer. According to Berkshire’s 2000 annual report, Buffett heard about the jewelry chain through Barnett Helzberg, from whom Berkshire bought Helzberg Diamonds in 1995. Another July 2000 acquisition was Justin Industries, which makes Western boots under the brand names Justin, Tony Lama, Nocona and Chippewa. Earlier acquisitions include Borsheim’s Fine Jewelry, Dexter Shoe Co., H.H. Brown Shoe Co. and Lowell Shoe Co.

Other fashion firms that have held Buffett’s interest are those classified as stock investments — purchases of shares of firms such as Liz Claiborne, Jones Apparel Group and Gap. Obviously, whether it’s companies Berkshire owns outright or those that are solely investment interests, Buffett is attracted to names that have a certain amount of brand equity among consumers. Top consumer brands associated with Berkshire are two that the fund owns: Benjamin Moore Co. and The Gillette Co. It also has an investment interest in The Coca-Cola Co.
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