Update: GHCL to acquire third-largest US textile company
26 December 2005
Hyderabad: The cost of the acquisition of Dan River, the Virginia-based home fashion and fabric maker is $17.50 million. GHCL will fund this acquisition from its recently concluded FCCB issue proceeds, while the existing debts will be refinanced. The acquisition process is likely to be completed by first week of January 2006, after which GHCL would have complete control over Dan River's operations.
Dan River Inc., which already has its outsourcing arm in China and Pakistan, is the leading player in the US textile markets with an annual turnover of $250 million from home textiles. The company has among the widest sales & distribution network within the US catering to large retailers and is a preferred supplier of large retailers like JC Penney, Linen & Things, Wal-Mart, Bed, Bath & Beyond.
This acquisition enables GHCL to enter into marketing arrangements of $250 million even before its manufacturing unit at Vapi, Gujarat commences operations in March 2006. Dan River is well known for its premium brands like 'Bed In a Bag,' Marquis Home Collections and Alexander Julian apart from high margin brands like Juvenile Segments.
Sanjay Dalmia, chairman, GHCL said, "This acquisition provides us with an ideal opportunity to leverage Dan River's global platform and a renowned global brand in order to make GHCL one of the dominant player in the Home textile space globally."
"It would be ideal combination of low cost strong manufacturing base with a large established marketing platform to put us on the fast track growth".
GHCL is in the process of expanding its capacity in spinning from 85,000 spindles to 140,000 spindles over the next 24 months. The company is in the process of completing the state-of-art home textile manufacturing facility at Vapi at a cost of Rs.230 crores, the production for which will commission by March 2006.
The Vapi unit at 90 per cent capacity is likely to generate $100 million in revenues. After the expansion GHCL would become first company in India to have integrated production facilities from spinning, weaving, finishing to making up and would rank amongst top three players in India in the home textiles segment.
"Dan River will be able to integrate its marketing capability in the US home textile space with GHCL's textile facility at Vapi, besides integrating our global outsourcing strategy of sourcing from India, Pakistan & China. A substantial value creation for the Dan River business to become the most competitive home textile Player in the US, further adding substantial value for the shareholders," said Greg R. Boozer, chief of outsourcing operations, Dan River.
GHCL's subsidiary recently acquired the controlling stake in SC Bega Upsom in Romania and has signed an agreement to acquire the only other soda ash manufacturer in Romania. With these acquisitions, GHCL's global capacity would rise to 18,00,000 mtpa from the current capacity of 600,000 mtpa.