Murdock to Sell Most of Cannon : Fieldcrest Mills Will Pay $250 Million for 3 Operations
Los Angeles financier and developer David H. Murdock said Wednesday that he has agreed to sell most of his Cannon Mills operations to another North Carolina textile manufacturer, Fieldcrest Mills, for $250 million.
Although a sale or merger involving Cannon Mills was rumored for months, another textile giant, J. P. Stevens & Co., was widely considered the most likely suitor.
Under the definitive agreement, Murdock will sell Cannon’s towel, sheet and bedding businesses, which account for sales of from $500 million to $600 million annually, or about 80% of the company’s overall sales.
Those operations employ 12,900 workers in 12 plants and 14 sales offices.
Cash, Note
The terms of the sale, which is scheduled to close in mid-January, call for Fieldcrest to pay $220 million in cash and a note valued at $30 million.
Announcement of the deal came less than two months after Murdock took a major role in defeating a union organizing drive at Cannon’s headquarters in Kannapolis, N.C.
Last August, during the stormy campaign, Murdock told employees in a letter that Cannon was losing money this year and that he had approached other textile makers to discuss mergers that would strengthen the company.
Nearly four years ago, Murdock paid about $400 million for the company in a highly leveraged deal.
Cannon’s assets included $50 million in cash, which helped finance the purchase.
Fieldcrest’s acquisition does not include land that Cannon owns in the Kannapolis area, which Murdock valued at about $150 million.
The deal also excludes blanket and yarn manufacturing operations employing 2,600 workers that provided about 20% of Cannon’s sales last year.
Since Murdock purchased Cannon in early 1982, the company has spent a reported $200 million for plant modernization.
“It looks like he’s making a profit . . . not a killing, perhaps,” said Kay Norwood, a textile analyst with Interstate Securities in Charlotte, N.C.
Murdock, who directs his huge and diversified ventures, including Castle & Cooke, from the penthouse offices of his Pacific Holding Co. in Westwood, said in a prepared statement that he signed the sale agreement “with mixed emotions.”
But Murdock and Joseph B. Ely II, chairman and chief executive of Eden, N.C.-based Fieldcrest, said a combination of the capabilities and skills of the two companies would give strength and stability to employees and “superior products” to customers.
Fieldcrest Mills, which operates 21 plants in five states, last year reported sales of $573 million, of which $385 million came from bed and bath products marketed under the Fieldcrest and St. Marys label.
Another $144 million in revenue came from sales of its Karastan carpets and rugs.
The company’s net income was a relatively meager $4.1 million, giving it a profit margin of less than 1%.
No Antitrust Problems Seen
Norwood said Cannon had about 34% of the towel market and Fieldcrest had about 18% in 1984. She said the acquisition would give Fieldcrest “a commanding lead” in the towel business with roughly half of the market.
However, Norwood said that she did not expect the deal to run into trouble on antitrust grounds.
Jay Melzer, an analyst with Goldman, Sachs & Co., the New York investment banking firm, said Fieldcrest has performed well in the higher-priced retail market, while Cannon was strong in the middle and lower levels of the market.
Nine of the 12 Cannon plants being sold are in North Carolina, two in are in South Carolina and one is in Georgia.
Publicly traded Fieldcrest Mills is controlled through a nearly 50% interest acquired about a year ago by Boston-based Amoskeag, of which Ely also is president.
Amoskeag is a holding company that owns Bangor & Aroostock Railroad, a modular-housing company and a land-investment concern.
