Article Number : 609 |
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| Date | 9/12/2005 11:58:03 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=609 |
| Abstract | Dalton—Shaw Industries has entered into a definitive agreement with SI Corp., to buy its carpet backing operations in Chickamauga, Ga... |
| Article | Dalton—Shaw Industries has entered into a definitive agreement with SI Corp., to buy its carpet backing operations in Chickamauga, Ga. While terms of the purchase were not disclosed, FCNews learned it was a cash deal. When the transaction is finalized, which is expected in the fall, two significant events will take place: Shaw will become arguably the largest carpet backing producer and SI will not do business in the flooring industry for the first time since 1969. Though officials from neither company would say, FCNews estimates SI’s carpet backing business does approximately $275 million a year. Kemp Harr, SI’s vice president, was quoted in the Chattanooga Times Free Press that the company’s annual sales will go from about $500 million to $200 million-plus. Research indicates the company controls nearly 40% of the $700 million carpet backing industry. Shaw will be taking over an operation that employs approximately 1,200 people and encompasses a 1.5 million square foot, state-of-the-art facility. Julius Shaw Jr., executive vice president, said the company’s carpet backing needs will almost be met via this purchase. “The capacity, especially when combined with that of the primary backing plant we own in Charlotte, N.C., is a near perfect fit to our demand.” The facility in North Carolina was acquired 14 years ago when Shaw bought Salem Carpet Mills. While it has since been upgraded and “tweaked” for more volume and efficiency, it in no way met the manufacturer’s needs. “Plus,” Shaw noted, “it only makes the primary backing, not the secondary. “So,” he added, “even with this acquisition, we will still need to purchase some of our backing needs from outside sources.” Those outside sources are getting fewer and fewer. In fact, in less than a year, the industry’s three largest companies, which controlled at least 90% of the market, have each come under new ownership, with only one not under the auspices of a carpet mill. Last fall, BP sold its Amoco Fabrics & Fibers subsidiary to AFFC Holdings, a newly-formed company sponsored by an investor group comprised of Sterling Group, Genstar Capital and Laminar Direct and renamed the business Propex (FCNews, Oct. 25/Nov. 1). And, earlier this year, Mohawk Industries bought Wayn-Tex (FCNews, Feb. 21/28). Shaw said there will be a transition period in which other customers of SI’s carpet backings will be phased out since the mill will be requiring every ounce of capacity to satisfy its own needs. For Shaw, the deal fulfills more than simply meeting the vast majority of its demand for backings, it accomplishes two important objectives: It continues Shaw’s push to be a 100% vertically integrated carpet manufacturer, and it gives the company total control of its own products. With regard to the second point, Shaw and SI have, over the last 10 years, collaborated their research efforts to create new types of backing systems designed to be easier to handle and install. Most notable is SoftBac and SoftBac Platinum, which Julius Shaw noted “have been absolutely wonderful products since SoftBac was first introduced almost eight years ago (FCNews, Jan. 5, 1998). In fact, sales continue to grow. It has a very successful track record of no restretches, less installation problems and an improved finish to the final product, so will we continue to incorporate it on our better end goods.” As for giving the mill another piece of the total carpet making puzzle, Shaw said the company has been on this path since it first started manufacturing its own broadloom products 40 years ago. “If you look at our history,” he added, “we have taken ownership—either through acquisition or building from the ground up—of key components of the manufacturing process from start to finish. This is just another step along the way of backward integrating.” The Chickamauga facility is also centrally located in comparison to Shaw’s various manufacturing plants. “Logistically, it’s beautiful,” he explained. “It’s so centrally located and sits in the heart of the vast majority of our plants. “This purchase made a great deal of sense for us in so many ways,” Shaw concluded. —Matthew Spieler |