Article Number : 620 |
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| Date | 9/24/2005 4:03:33 PM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=620 |
| Abstract | Hicksville, N.Y.—Two weeks after announcing its intentions to purchase the carpet backing operations from SI Corp., Shaw Industries said it signed a definitive agreement to acquire the U.S... |
| Article | Hicksville, N.Y.—Two weeks after announcing its intentions to purchase the carpet backing operations from SI Corp., Shaw Industries said it signed a definitive agreement to acquire the U.S. nylon carpet fibers business from Honeywell International. The deal also gives Shaw ownership of the Anso and Zeftron brand names. While terms of the transaction were not disclosed, the cash deal, expected to be completed in the fourth quarter, also includes a long-term agreement for Honeywell to supply Shaw with caprolactam and nylon resin, two important intermediate chemicals used in the production of nylon carpet fibers. Honeywell’s nylon business is made up of two operations—fibers and intermediates. In addition to the caprolactam and nylon resin, the intermediates segment produces Aegis branded nylon resin for various fiber and plastic applications and Sulf-N branded ammonium sulfate fertilizer and other chemicals. Along with the Anso and Zeftron brands, Shaw will take control of Honeywell’s nylon manufacturing operations in Anderson, Clemson and Columbia, S.C., and it will get Honeywell’s 50% stake in the Evergreen Nylon Recycling facility in Augusta, Ga. There are about 700 employees at these facilities and, when combined with those from the SI deal, Shaw will be adding almost 2,000 people to its payroll. Though Shaw already produces nylon, Julius Shaw Jr., executive vice president, said this purchase is similar to SI in that “it’s another step to make us more vertically integrated and more cost efficient. We’ve been adding to our nylon filament capacity for several years, but this deal simply fast forwards us in the process.” In recent years, Shaw has beefed up its nylon making capabilities through various upgrades to existing facilities such as the $35 million upgrade to its Andulusia, Ala., plant (FCNews, March 29/April 5, 2004) or, as with Honeywell, through acquisition, including the two facilities it bought from Beaulieu a few years ago (FCNews, Feb. 4/11, 2002). Along with nylon, the company has a huge polypropylene (olefin) making operation and also manufacturers polyester (PET). Honeywell is already considered by most industry experts to be the number two nylon supplier behind Invista, maker of the Stainmaster and Antron brands. The chemical company said the four operations included in the Shaw deal represent approximately 90% of its nylon fiber capacity. Its operations in Shanghai, China, and Armprior, Canada, as well as its textile operation in Anderson, S.C., are not part of the transaction. The company said in 2005, its nylon business was expected to have revenues of approximately $1.2 billion and that after the divestiture and subsequent supply agreement the remaining operations will have annual revenues around $900 million. Even with Honeywell’s operations, Shaw said all its fiber making needs still will not be met in-house. “This will allow us to handle a much larger percentage internally, however we will still have to buy from outside sources. There is still a good percentage of our nylon needs that need to be purchased.” Much comes from the other brand name fibers Shaw uses in its residential and commercial products, most notably Stainmaster and Antron from Invista, and Wear-Dated and Ultron from Solutia, as well as non nylon brands such as Shell Chemical’s Corterra brand of PTT. “We still greatly value these other brands,” Shaw said. “They are well known to residential and commercial customers and we fully intend to keep using them to give dealers a well rounded assortment of products.” He said the Anso and Zeftron brands “will continue to be offered. These are currently a very important part of our product line up and we don’t want to change that.” As to how the Honeywell business will be integrated into Shaw’s existing operations is too early say, he said, such as whether a separate yarn division will be created. When the deal is finalized, it will put Shaw in a similar position that it will be in once the SI deal is finished: as a supplier to other carpet mills. While analysts expect Shaw and its competitors to eventually go their own ways through a gradual transition, first with the branded yarns, and then, depending on capacity the unbranded fibers, Julius Shaw said the mill “fully intends to assist all current Honeywell customers with their fiber needs—branded and unbranded—including all programs.” The same can be said for retailers who take advantage of Honeywell’s co-op program and rely on its brands for driving traffic. “It is our intent to hone existing agreements as they relate to retail support,” Shaw said. “And, in the long-term, we plan to offer our own programs and support that add value to these highly reputable brands.” One of those support avenues would be in advertising, though the deal will not be finalized in time for Shaw to incorporate them into the national consumer advertising campaign it just announced (see related story, this page). “Our intent with this is to promote the Shaw name,” he explained, “but we want to keep the Anso and Zeftron names with dealers and contractors. Within the industry, these are well known names.” With regard to the Evergreen facility, Honeywell shared it equally with DSM Industries. And while the recycling plant has been shut down for a number of years, Shaw said the company is “hoping to bring it back on line in the future. It had a good operation for several years and even though it has been closed, everything still works. Evergreen fits very nicely with our recycling and environmental model which is why we would like to get it back in operation in the near future.” Shaw needs to wait until the acquisition goes through before anything can be done, including discussing future strategies with DSM. In addition, industry experts told FCNews there is no reason to believe Shaw will not carry on with the 6ix Again Carpet Recovery Program BASF launched in 1994 for Zeftron and which Honeywell has maintained since buying the operation more than two-and-a-half years ago (FCNews, Jan. 20/27, 2003). In fact, in just the last five years alone, approximately 200 million pounds of carpet have been diverted from landfills, with most of it coming through a patented closed-loop recycling process, which creates a truly recycled—not down-cycled—nylon product for use in new commercial carpets. —Matthew Spieler |