By FIONA ROTHERHAM
Privately owned Feltex Carpets becomes Australasia's biggest carpet maker with its purchase of the Australasian operation of US-based Shaw Industries.
The $US73 million ($149 million) deal, speculated on last month, requires Australian Government approval. The price includes debt.
Feltex chief executive Chris Davis said the combined company would have nearly 1700 staff and projected turnover of more than $400 million.
Shaw Industries Australia is twice the size of Feltex and is the second main player in Australia, with a 32 per cent share. It was only a bit player in New Zealand, holding around 3 per cent of the market.
After six months, the new Australian activities will be brought under the Feltex brand.
Shaw Industries, the world's biggest carpet manufacturer, bought the Australian operation in 1993. The sale is part of the Georgia-based company's exit of its foreign interests worldwide after poor performances.
The move gives export-focused Feltex a play in all markets as it produces wool carpet while the larger Shaw makes predominantly synthetic, mainly for the domestic market.
"We think that is a serious synergy going forward. We think joining two is going to make two and a half," Mr Davis said.
Of the 65 per cent of Feltex production exported, 80 per cent is to Australia.
Mr Davis said the new company's sheer scale would have an impact overseas, but the Feltex name was already well recognised.
"Every time I fly overseas I see our carpet on the plane and then on the floor in the hotel I stay at. That's a pretty good story."
The deal is likely to benefit the NZ wool industry as Feltex intends to source all its wool needs locally. After the merger, Feltex said, it would be converting about 12.5 per cent of the NZ wool clip into carpet.
At present, Shaw sourced significant quantities of wool yarn from overseas, but this will eventually be phased out in favour of Feltex's NZ-produced yarn.
Feltex was the subject of a management buyout in 1997. Mr Davis, marketing general manager Allan Steedman and investment bank Credit Suisse First Boston bought it from British-based BTR Nylex for an undisclosed sum.
Industry sources have speculated that the Shaw merger is a precursor to an Australian float of the merged operations as an exit strategy for CS First Boston, thought to hold an 85 per cent stake.
Mr Davis said that although a float might be possible long term, it was not on the table.
"CS First Boston sees our ability to produce wool and wool carpet, and do it well, as an opportunity for investment."
The managing director of rival Cavalier Corporation, Alan James said he did not expect a big shake-up in the Australasian market from the acquisition.
"They each operate in their own way. The principal objective of this acquisition is to create a vehicle large and attractive enough for a sharemarket float."
Feltex buy makes it top player in Pacific
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