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New Textile Behemoth: Ross Forms $900M ITG, Poised to Take On China

Wilbur L. Ross’ second conglomerate was born Wednesday with the merger of Burlington Industries and Cone Mills into International Textile Group.

Wilbur Ross

Wilbur Ross

Photo By WWD Staff

NEW YORK — Investor Wilbur L. Ross christened his second conglomerate Wednesday.

During a news conference in Greensboro, N.C., Ross said he was merging Burlington Industries and Cone Mills into a new entity called International Textile Group. In a sign that the first word of the new name is no rhetorical flourish, Ross also revealed that he’s headed to China next week.

While he offered few details about his plans for the trip, he said he intended “to discuss a whole range of topics with folks there and to try to see what opportunities there are that make some sense and are consistent with our overall objectives.”

Those objectives clearly include the growing threat from China in the runup to the phaseout of all textile and apparel quotas on Jan. 1 among World Trade Organization countries. And in a week when the nation’s largest union promised to make the threat from China an issue in the presidential campaign and filed a Section 301 complaint, Ross weighed in on behalf of the industry’s management.

“The textile industry as a whole in my opinion is not remotely ready for the lifting of quotas altogether,” he said. “I believe that something approaching 600,000 jobs are very much at issue, mostly in the South, if the quotas just came off 100 percent on Jan. 1. I can’t imagine either presidential candidate would be in favor of losing 600,000 jobs.”

Ross on Wednesday did not address the AFL-CIO’s filing of its Section 301 petition calling on the U.S. to limit Chinese imports in response to unfair labor conditions, including lax enforcement of minimum-wage laws. However, in a Monday interview on the subject, he said, “There’s no question they have been artificially holding [wages] down.”

As noted, the National Association of Manufacturers and the American Textile Manufacturers Institute said Tuesday that they plan to file a second 301 petition over China’s currency, which the organizations claim are artificially supported.

Ross has also been lobbying on the Central American Free Trade Agreement. Initially, he was one of the few voices in the U.S. textile industry to back the current CAFTA proposal, but last month he raised concerns that it would become a loophole to allow more non-U.S. fabrics into the regional trading area.
He said trade politics would influence what, if any, moves the company makes to expand operations overseas.

“Exactly what our map would look like would depend in some degree on what happens in China next week and what happens in Congress with CAFTA,” he said.

Clearly the scale of his textile holdings will further amplify his influence on trade, which was already substantial in Washington given the fact that he also holds a significant interest in another major American industrial sector — steel. Discussing ITG, Ross said the new company will have $900 million in total revenue, a figure that he hopes will soon hit the $1 billion mark. More critically, he said, the company’s combined debt stands at $75 million, compared with the total of $1.1 billion the companies held when they filed their bankruptcy petitions. Burlington filed in November 2001 and Cone filed this past September.

“We now have the financial resources in place necessary to grow the company,” he said. “We also believe we have the management resources in place.”

Ross, who serves as chairman of investment group W.L. Ross & Co. — which acquired Burlington and Cone — also holds the post of chairman of the new company, ITG. He named Joseph Gorga, whom Ross had named Burlington’s president and chief executive officer in October 2003, to the same post at ITG.

When he acquired Burlington, Ross ousted most of the company’s top management with the exception of Gorga. The top Cone officials were more fortunate. He named Cone chairman and ceo John Bakane ceo of the Cone Denim division of ITG, and appointed Gary Smith, who had been Cone’s executive vice president and chief financial officer, cfo of the combined companies. Both executives report to Gorga.

Ross also had relatively good news for Cone’s 2,300 staffers.

“This is not going to be about laying off half the people or anything of that sort,” he said. “Any employee dislocation from the consolidation will be relatively minor.”

ITG as a whole now employs about 7,300 people, but both companies had cut their workforces substantially in the year prior to their acquisitions. The two companies now maintain separate headquarters in Greensboro, which Ross said he plans to combine. He noted that there could be minor reductions as the companies are integrated.
ITG will be divided into four divisions: Burlington Apparel Fabrics, Cone Denim — which will incorporate Burlington’s Mexican denim mill — Burlington Home Furnishings and Nano-Tex.

Burlington veteran Ken Kunberger will head the apparel fabrics business. The company said it is searching for a president for the home furnishings unit.

Ross said his key strategies for the merged company include focusing on developing new fabric technologies that will appeal to consumers, boosting the identity of the company’s Burlington and Cone brands and developing a lower-cost model of operating.

The pattern Ross has taken in textiles is strikingly similar to the model he followed in creating the Richfield, Ohio-based International Steel Group out of three bankrupt steel companies. ISG held an initial public offering in December, raising $462 million.

Ross emphasized he was in no rush to flip ITG onto the markets.

“This is early days. We just now have organized the company, so our first order of business is to get it up and running, get the right people in place and give the management a chance to get things going and then later worry about an IPO,” he said. “At some appropriate time, it would be useful for ITG to be public, but we have no immediate plans to do so.”

While he is known for snapping up bankrupt companies and restructuring them, he said that is not his only strategy and that it would be far less likely that he’d buy bankrupt companies abroad.

Both Cone and Burlington already had presences in Asia. Cone has a denim joint venture in Turkey, while Burlington has a quarter interest in an Indian mill. Ross said Cone’s IsKone venture would be continuing, but that Burlington’s Indian joint venture partner had indicated that he intends to buy out Burlington’s stake in the firm.