Carpet-making rivals talk co-operation

The canned merger between carpet-makers Feltex and Godfrey Hirst won't be revived, but sharing a wool-scouring facility or trading plants are options the rivals will explore within the next few weeks.

Feltex chairman Tim Saunders said yesterday the opportunities included various joint ventures, merging some operations, sharing or selling a plant to the other party, or closing one in the extreme.

Meanwhile, Feltex is confident it can heal its own wounds, pressing on with an operational review to pinpoint more cost savings and efficiencies and restore profitability.

Analysts said the $15 million in annual savings this had resulted in demonstrated it was well on the way to doing that.

However, Feltex shares took a 4c drop yesterday to close at 59c as some investors saw the move as a departure from a safe path to restore value to the shares which have plunged 62 per cent this year.

Melbourne-based Godfrey Hirst's four-month-old proposal to merge the two companies' operations was mutually called off on Tuesday night.

Saunders said the proposal was effectively a backdoor takeover and the board could not support it. Market speculation had centred around privately-owned Godfrey Hirst becoming Feltex's cornerstone shareholder with a controlling stake of more than 50 per cent, with the balance of shares remaining listed.

A confidentiality agreement prevents both companies from disclosing details of the proposal.

However, Godfrey Hirst, which netted a 5.83 per cent Feltex stake in June, said it was attractive to shareholders, offering significant uplift to the share price and restoration of the dividend.

Feltex took advice from financial advisers Cameron & Co in rejecting the proposal.

Saunders did not think the company had missed an opportunity and was confident in its ability to return value to shareholders through the restructuring.