Wickes’ Latest Acquisition : Collins & Aikman Thriving in Tough World of Textiles
Soon after Willis G. McCullough joined a small textile company in the early 1900s, he sensed that the automobile would become a fixture on the American landscape. And with it, he decided, would be a need for seat coverings and carpeting for those Model Ts and Cadillacs.
Eighty years later, that textile manufacturing company--Collins & Aikman--still dominates the market for automobile upholstery, not to mention wall coverings, carpeting and decorative fabrics for homes, businesses and even airplanes.
And its success at dominating its markets in an otherwise import-whipped industry has attracted not only rave reviews on Wall Street. On Saturday, it attracted a buyer in cash-rich Wickes Cos. of Santa Monica, which has been scouring the country this year for acquisitions.
Wickes announced Saturday that it will begin today an amicable, $53-a-share tender offer for Collins & Aikman’s 21.8 million common shares. The $1.16-billion cash deal represents a hefty premium over the New York textile company’s book value of $368 million and is 39% higher per share than the price at which the company’s stock closed on Friday.
In announcing the agreement, Wickes Chairman Sanford C. Sigoloff said he viewed Collins & Aikman as an excellent fit with Wickes, a lumber and building materials merchant that operates the Builders Emporium and Ole’s Home Improvement chains. Although primarily a retailer, Wickes also is a leading distributor of automotive replacement parts and accessories and, through its Kayser-Roth unit, a manufacturer and retailer of apparel and hosiery.
As other textile companies have been devastated by imports, Collins & Aikman--with a small New York headquarters and an important Southern “hub” in Charlotte, N.C.--through the years has stayed in the vanguard by avoiding foreign competition and keeping pace with technological changes.
“There’s only one good textile company,” says Arthur E. Lichtendorf, an analyst with E. F. Hutton in New York. “This is it.”
“Over the past year or two, it has definitely outshone other diversified textile companies in both performance and stock price,” agrees Florence Kawoczka of Johnson Redbook Service in New York.
Although analysts foresee that this year’s earnings will be flat, the company’s six previous years had shown solid growth. Last year, Collins & Aikman reported a pretax profit of $116.1 million on $1.1 billion in sales. Net income was $66.4 million.
Its 20% return on equity--a measure of how effectively the company uses its money--is twice that of its competitors’. Most of the $227 million spent on plant modernization since 1981 was generated internally, so that debt totals only about 20% of capital. One indication of the company’s effective productivity: Since 1981, the company’s work force has grown 16% while sales have risen 82%.
Analyst Lichtendorf describes the company’s executives as “tough, hard-nosed businessmen, not the kind you could walk in and take over very easily.” Donald F. McCullough, son of Willis, is the current chairman and will join Wickes’ board. Alfred S. Crimmins, a highly regarded certified public accountant who became president in 1980, will also remain.
Company Founded in 1843
The company blames a sluggish economy for the year’s relatively lackluster performance. “Earnings will be relatively flat,” Lichtendorf said. “The economy’s just not that strong. They’re pushing as hard as they can and just cannot make more money.”
The company got its start in 1843 as a window shade manufacturer run by Gibbons Kelty on New York’s Lower East Side. In the 1870s, Charles Aikman, a nephew of Kelty, came on board and spurred an entry into furnishings, upholstery and other lines.
In 1889, Aikman hooked up with William G. Collins, and in 1891 the company took its current name. Under Willis McCullough, the company expanded into the automotive segment and began its spinning and weaving businesses. After going public in 1926, the company weathered the Depression with just one profitless year.
