Collins & Aikman Announces Heartland Investment and Fourth Quarter Update
TROY, Mich.–(AutomotiveWire)–Jan. 12, 2001–Collins & Aikman Corporation (NYSE:CKC) announced today that Heartland Industrial Partners, L.P. (Heartland) has agreed to purchase 25 million newly issued primary shares from the Company at a price of $5.00 per share, representing a cash investment in the Company, before fees and expenses, of $125 million. The purchase price also gives the Company a profit participation right of up to $.25 per share on certain future stock sales by Heartland. This transaction immediately provides Collins & Aikman with capital in order to enhance its long-term growth, and represents a key step in making the Company a stronger competitor and improving future stock liquidity.
The Company also announced today that its controlling shareholders — Blackstone Capital Partners, L.P. (Blackstone) and Wasserstein Perella Partners L.P. (Wasserstein) have entered into a definitive agreement to sell 27 million shares, or approximately 50% of their collective holdings in Collins &Aikman, to Heartland at a price of $5.00 per share, plus a profit participation right as previously described. The two transactions combined represent a $260 million investment in Collins & Aikman stock by Heartland and provide liquidity to the selling shareholders.
Commenting on the transaction, Thomas E. Evans, Collins & Aikman’s Chairman and Chief Executive Officer stated, “This deal is truly a transforming event for Collins & Aikman. I believe that with this infusion of new capital from Heartland, we should be able to significantly enhance the growth opportunities for our global business, subsequently maximizing value for our employees, customers, suppliers and shareholders. We enthusiastically welcome Heartland to our organization and, as evidenced by their significant investment in the automotive industry, we couldn’t ask for a more supportive and strategically aligned partner. This transaction should position Collins & Aikman to be an even stronger player in our sector.”
Highlights of the Transaction, Upon Completion, Include:
- Heartland purchases 25 million newly issued primary shares from Collins & Aikman at a price of $5.00 per share ($125 million before fees and expenses).
- Heartland purchases 27 million shares from Blackstone and Wasserstein at a price of $5.00 per share ($135 million).
- Transaction projected to close by mid-February, 2001, subject to certain conditions.
- Collins & Aikman’s total shares outstanding increases from 62 million to 87 million.
- Blackstone & Wasserstein ownership percentage declines from 87% to 31%.
- Heartland ownership percentage in Collins & Aikman will be approximately 60%.
The Collins & Aikman Board of Directors, upon the unanimous recommendation of a Special Committee of independent directors has approved the transactions. The Special Committee was advised by UBS Warburg and the law firm of Morris, Nichols, Arsht & Tunnell. The transaction, which is expected to close by mid-February, is subject to certain conditions including bank and bondholder consent, the need to seek waivers of the change of control provisions in the Company’s existing debt agreements (all of which are to remain outstanding), and the need to obtain Hart Scott Rodino clearance.
“Collins & Aikman represents an ideal growth platform for Heartland,” stated David A. Stockman, founder and senior managing director of Heartland Industrial Partners. “Their strong senior management team, leading market share positions and global capabilities in acoustics and interior surface styling products all combine to make Collins & Aikman a perfect candidate for our industrial `build-up’ investment strategy. We believe that with Heartland’s support, Collins & Aikman will be better positioned than ever to capitalize on growth opportunities.”
The Company also reported that recently announced additional fourth quarter North American light vehicle production cuts are currently expected to reduce the Company’s fourth quarter sales by approximately 12 percent as compared to the fourth quarter of 1999. Prior to these most recent production cuts, the Company had expected fourth quarter sales would decline approximately eight to 10 percent versus the year ago period. The Company estimates that these additional production cuts will adversely impact fourth quarter operating income by approximately $6 million.
Additionally, the Company announced that its fourth quarter operating income would be negatively impacted by approximately $6 million, due primarily to the write-off of certain assets and the impact of additional European restructuring actions, including the layoff of approximately 25 staff employees and the relocation of Collins & Aikman’s European headquarters from Wiesbaden, Germany to the Company’s existing technical center in Heidelberg, Germany. These European cost cutting actions, in tandem with the asset write-offs and North American production cuts, are expected to put the Company’s fourth quarter operating income in the $15-to-$20 million range.
“Given the current tough operating environment and the fact that Heartland Industrial Partners will be coming in as our new major shareholder, these fourth quarter actions, though difficult, made good sense for our Company,” stated Thomas E. Evans, Chairman and Chief Executive Officer of Collins & Aikman. “Going forward, I believe we’re well positioned to continue to drive costs out of our system, enhance our debt coverage and further leverage our leadership position in the products we provide.”
Heartland Industrial Partners, LP is a private equity firm established to “invest in, build and grow” industrial companies in sectors ripe for consolidation and long-term growth. The firm has equity commitments in excess of $1.1 billion and intends to increase its commitments to $2 billion. Heartland was founded by David A. Stockman, a former partner of the Blackstone Group and a Reagan administrative cabinet officer; Timothy D. Leuliette, the former President and Chief Operating Officer of Penske Corporation; and Daniel P. Tredwell, a former Managing Director of Chase Securities.
Collins & Aikman, with annual sales approaching $2 billion, is the global leader in automotive floor and acoustic systems and is a leading supplier of automotive fabric, interior trim and convertible top systems. The Company’s operations span the globe through 63 facilities, 13 countries and over 15,000 employees who are committed to achieving total excellence. Collins & Aikman’s high-quality products combine industry-leading design and styling capabilities, superior manufacturing capabilities and the industry’s most effective NVH “quiet” technologies.
Information about Collins & Aikman is available on the Internet at www.collinsaikman.com. Collins & Aikman will be conducting a conference call Tuesday, January 16, 2001, at 11 a.m. EST to discuss the transactions. Interested parties may either call (973) 628-9554, or access the web cast via the Company’s web site at www.collinsaikman.com. If you are unable to attend, you may dial into the digital replay at: (402) 220-2919, pin number 22121.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to general economic conditions in the markets in which Collins & Aikman operates, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers, changes in consumer preferences, dependence on significant automotive customers, the level of competition in the automotive supply industry, pricing pressure from automotive customers, the substantial leverage of the Company and its subsidiaries, limitations imposed by the Company’s debt facilities, charges made in connection with the integration of operations acquired by the Company, the implementation of the reorganization plan, changes in the popularity of particular car models or particular interior trim packages, the loss of programs on particular car models, risks associated with conducting business in foreign countries and other risks detailed from time to time in the Company’s Securities and Exchange Commission filings including without limitation, in Items 1 and 7 of the Company’s Annual Report on Form 10-K for the year-ended December 25, 1999, and Item 1 in the Company’s Quarterly Report on Form 10-Q for the periods ended April 1, 2000, July 1, 2000 and September 30, 2000.