Burlington Industries accepted a $608 million offer by W.L. Ross & Co. on Friday, which serves as the base price for a court-approved auction set for today.
This is Ross’ second attempt to buy Burlington. The bankruptcy baron, who is head of the textile firm’s unsecured creditors committee, was outbid by Warren Buffett’s Berkshire Hathaway in February. The committee subsequently filed court papers in Delaware seeking a review of the negotiation process that led to the Berkshire bid. As reported, Berkshire eventually walked away from its $579 million offer when it failed to get the terms and conditions it wanted on a breakup fee.
Ross and others submitted their bids earlier this month as required by the procedures set forth by the bankruptcy court.
The Ross agreement announced on Friday contemplates the concurrent sale of Burlington’s Lees Carpet business to Mohawk Industries Inc. Essentially, that means that Ross, if successful in his quest, would buy Burlington and receive payment from Mohawk for Lees. Ross’ equity fund would then be responsible for funding the balance of the purchase price to acquire Burlington. How much Mohawk would pay Ross could not be learned.
Today’s auction procedures provide for a breakup fee of 1 percent of the proposed purchase price and requires bidding increments of $3 million. To outbid Ross, the successful bidder would have to submit an initial offer of nearly $617.1 million, as well as receive bankruptcy court approval of the sale.
George W. Henderson 3rd, chairman and chief executive officer of Burlington, said in a statement, “We are pleased that the bidding process is coming to a conclusion and we believe that it will enable us to maximize the value of the company and produce the best results for our customers, employees, suppliers and creditors.”
The results of today’s auction are expected to be submitted for bankruptcy court approval on July 31. If approved, the sale would be incorporated into a plan of reorganization, which would then be submitted to creditors for their vote.
Assuming that the Ross bid remains successful, the parties are expecting the sale to close in October. Unsecured creditors, assuming no adjustments to the purchase price, are likely to receive a distribution in the range of 40 percent of allowed unsecured claims. Secured creditors would get repaid in full.