Textiles big three becomes big two as WestPoint acquires J.P. Stevens - West Point-Pepperell Inc., J.P. Stevens and Co. Inc

Discount Store News, August 22, 1988

Textiles Big Three Becomes Big Two As WestPoint Acquires J.P. Stevens

WEST POINT, Ga.--The new entity created by the purchase of J.P. Stevens by West-Point-Pepperell may itself be a takeover target, as Fruit of the Loom Corp. has asked for clearance to buy up to one-quarter of WestPoint's stock. However, a spokesman from WestPoint noted that, as of yet, Fruit of the Loom has not filed the papers required when a stockholder approaches 5 percent ownership of a company's stock.

WestPoint became the second-largest towel manufacturer in the country, with 25 percent of the market, behind Fieldcrest Cannon, as well as a dominant source of sheets in the country, with about 36 percent of the total market, with the purchase of Stevens. Industry observers noted that the overall effect on the industry should be slight, but they expect short-term disruptions in the flannel sheet market.

Stevens Now Split Up

Stevens, one of the largest textile manufacturers in the United States, has been split up, with Bibb Company acquiring some sheet and towel operations for $150 million and Odyssey Partners, an investment house which made a strong bid for the whole company, ending up with Stevens' carpet and industrial textile operations for $580 million. Overall, the deal totaled some $1.2 billion, or $68.50 a share.

That's up sharply from the original bid, the $765 million offered last winter by Stevens' management. At that time, analysts and some competitors observed that the offer was significantly below what they felt the company was worth, and WestPoint-Pepperell stepped in shortly thereafter. When the bidding topped the $1 billion mark, management was forced to drop out, throwing its support to Odyssey, which bid $1.1 billion. Stevens accepted that bid and also attempted to enjoin West Point from further hindering an Odyssey deal.

However, WestPoint, which had obtained antitrust clearance from the Federal Trade Commission, approached Odyssey directly, suggesting that a joint venture between the two (with Bibb added later) made more sense than continued head-to-head bidding. Stevens eventually accepted the offer, although not happily.

WestPoint now operates its Stevens holdings under an FTC "hold separate" agreement, but a company spokesman said that the agreement should expire in the near future, leaving the company free to merge some operations. "However, we'll continue to run much of Stevens separately," the spokesman said. "Our aim was to increase our presence in branded textiles, and Stevens has some extremely valuable brands. In many cases, they'll be competing directly with some WestPoint brands."

A competitor noted that the deal will not significantly alter the competitive situation in the towel industry. "No. 3 and No. 2 just became a larger No. 2," he said. "This isn't really going to change anything--WestPoint was already a very big company."

That will not hold true in sheets, where the WestPoint/Stevens combination is now far ahead of its nearest competitor in market share.

Another WestPoint spokesman said the company acquired 14 manufacturing facilities in Virginia, Alabama, North Carolina and South Carolina. The company does not anticipate any factory closings or significant layoffs in the near-term.

Relative to its strength entering the negotiations, the biggest winner may be Bibb, which took about half of Stevens' terry (towel) operations and a smaller chunk of its sheet production.

Bibb, whose market share will reportedly jump to 10 percent of the towel market and 12 percent of the bed linen market as a result of the deal, acquired mainly institutional supply manufacturing plants, characterized by a competitor as "less up-to-date than the plants WestPoint acquired."