Murdock Letter Discloses Cannon Mills Merger Talks
Three years after paying $413 million for old-line textile maker Cannon Mills, Los Angeles businessman David H. Murdock has approached other textile makers to propose mergers that would strengthen the ailing company.
The discussions, which ended unsuccessfully, were disclosed in a letter that Murdock sent to Cannon Mills employees urging them to resist a bitter union representation drive now under way at its Kannapolis, N.C., headquarters.
Murdock said that the privately owned firm, the world’s largest towel producer, has lost money this year under pressure from imports and that he has spent $12 million of his own money on Cannon Mills so far this year. The company’s international business declined to $24 million last year, down from $55 million in 1981, he said.
“For our mutual benefit and protection, I have no choice except to continue to explore all opportunities for Cannon to emerge as a stronger company,” he wrote in the Aug. 8 letter.
Murdock did not say whether he proposes to sell his entire 100% ownership of the firm or whether some kind of joint operation was contemplated.
Murdock and company spokesmen did not return phone calls Wednesday.
The mill purchase has apparently developed into a major headache for Murdock, whose deft dealings have created a multimillion-dollar empire based primarily on real estate assets. Rumors of Murdock’s interest in shedding the mill have swirled since the purchase but have recently circulated with renewed intensity.
Companies Not Talking
They have been fed by reports of the sheet and towel maker’s financial problems and staff reductions, and by news of Murdock’s interest in developing the Hawaiian real estate holdings of Castle & Cooke, the ailing fruit company now in the process of merging with Murdock-controlled Flexi-Van Corp.
Murdock’s announced plans to develop resort facilities on Castle & Cooke properties have prompted speculation that he may need assets now tied up in the mill.
The letter did not disclose the names of any of the major firms with which Murdock held discussions, but industry speculation has centered on J. P. Stevens of New York and Springs Industries of Old Fort, S.C.
Spokesmen for both companies would neither confirm nor deny their companies’ participation. One former mid-level manager at Cannon Mills said in a recent interview, however, that Springs had been approached but had not wished to pursue discussions.
Several industry officials and analysts were skeptical that Murdock will find a buyer, except perhaps an overseas maker wishing to exploit the widespread name recognition of the Cannon Mills label in the U.S. market.
“Mr. Murdock’s got a problem that he wants to share with somebody else, but domestic companies have enough of their own, thank you kindly,” one industry official said.
The official speculated that prospective buyers might be deterred by the heavy debt burden taken on by Cannon Mills to accomplish the 1982 purchase. The burden has presumably been enlarged by Murdock’s $200-million plant modernization program, the official said.
Industry sources noted, too, that the company’s niche in bed and bathroom textiles has seen a sharp increase in competition from overseas companies and U.S. makers, who have crowded into a specialty that not long ago offered some protection from the competitive dogfight.
A yearlong effort by the Amalgamated Clothing and Textile Workers to win representation at Cannon Mills has further complicated Murdock’s efforts at the mill.
Mill workers and organizers contend that workers have been treated unfairly in the company’s quest to improve productivity. They say the new management has sharply increased workloads, cut wages and forced out older workers who could not keep up with the faster pace.
