Berkshire Near Deal to Buy Fruit of the Loom

Berkshire Hathaway Inc., Warren Buffett’s investment vehicle, is near a deal to buy troubled clothing maker Fruit of the Loom Ltd. for about $840 million in cash, people familiar with the deal said.

The deal, which could be announced as soon as today, would give Berkshire “substantially all” the assets and working capital of Fruit of the Loom, which filed for bankruptcy protection in December 1999, the sources said. The cash proceeds would be split among creditors of Fruit of the Loom.

A Fruit of the Loom deal would mark Berkshire’s 11th acquisition in two years, continuing billionaire investor Buffett’s policy of acquiring so-called old-economy companies that are of medium size and profitable, generating cash to fuel other investments.

Fruit of the Loom and Berkshire were hoping to close the deal this week and were planning to announce it late Thursday, one source said. However, last-minute snags emerged.

Now an agreement could be announced today, with the deal expected to close in the first quarter of next year.

Berkshire could not be reached. Fruit of the Loom declined to comment.

Omaha-based Berkshire’s bid was favored over two separate offers worth $800 million to $900 million, one from a partnership of Blackstone Group and Russell Corp. and the other from Texas-Pacific Group with Canada’s Gildan Activewear Inc., said another person close to the deal.

Fruit of the Loom, a Cayman Islands-based underwear maker, has been operating under Chapter 11 bankruptcy protection since 1999. In March, the company said it planned to offer 99% of its equity to secured creditors representing about $1.2 billion in debt.

The creditors also would receive as much as $300 million in unsecured senior notes, the company said.

The deal caps a long process to restructure and sell the company.

Berkshire owns more than 40 businesses in a range of sectors. It focuses on insurance, which supplies a large capital “float” for Buffett to invest in stocks and bonds.

In the last two years, Berkshire has spent several billion dollars buying companies in areas as diverse as carpets, boots and paint to building products and insurance.

Berkshire’s last deal was buying transport and equipment leasing firm XTRA Corp. for about $590 million.

Last year, Berkshire bought MidAmerican Energy, boot maker Justin Industries, Ben Bridge Jeweler and the world’s No. 1 carpet maker, Shaw Industries.

Berkshire Class A shares rose $1,000 to $72,200 in New York Stock Exchange trading. Fruit of the Loom shares rose 5 cents to 31 cents in over-the-counter trading.