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...

An investment banker who has worked with Buffett on previous deals, observed, "Buffett favors top consumer brands because they have a good name, have a good management team and generate a certain amount of consumer loyalty for the brand. In the case of Gillette, it has a steady customer pool to sell to because men every day need to shave and razors need to be replaced. The same is true for Fruit of the Loom; it is a commodity product that people need to wear."

For the fourth quarter ended Sept. 28, Burlington reported net income of $36.1 million, or 67 cents a diluted share, compared with a net loss of $76.7 million, or $1.46 a share, a year earlier. The income included $62.4 million in income tax benefits, as well as $21.1 million in pretax restructuring costs. Sales were $220.9 million, down 32.5 percent. The company’s apparel fabrics operation narrowed its deficit, recording a $2.9 million loss before taxes, compared with a $13.1 million loss in the prior-year quarter. Sales at that unit fell 34.7 percent to $107.6 million.

The company said it cut its apparel fabrics manufacturing capacity by half this year. It has moved its apparel headquarters to Hong Kong, where the Burlington Worldwide division now sells apparel fabrics manufactured at Burlington’s plants in the U.S., Mexico and India, as well as fabrics made under contract by independent mills throughout Asia. One source inside Burlington feels that its increasingly global scope was one of the elements that appealed to Buffett.

For the year, Burlington recorded a $100.8 million net loss, which came to $1.89 a diluted share, deeper than the $91.1 million, or $1.73 a share, deficit last year. The loss included $146.5 million in income tax benefits and $165.8 million in pretax restructuring charges. Sales slipped 29.2 percent to $993.3 million.
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