2 big bargain hunters battle for Burlington

Wilbur Ross belittles offer of Warren Buffett's firm

February 13, 2003|By BLOOMBERG NEWS

NEW YORK -Warren E. Buffett's $579 million cash bid for Burlington Industries Inc. is opposed by a majority of unsecured creditors, financier Wilbur L. Ross Jr. said yesterday.

"Buffett is famous for buying dollar bills for 50 cents," Ross said in an interview. "We believe his offer is inadequate and apparently so do a number of other unsecured creditors."

Ross, whose W.L. Ross & Co. LLC holds 25 percent of Burlington's unsecured debt, is vying with Buffett's Berkshire Hathaway Inc. for control of the company, now in bankruptcy proceedings. Berkshire yesterday offered unsecured creditors as much as 35 cents on the dollar for their claims. Ross said his offer was worth 45 cents.

Ross also is chairman of International Steel Group Inc., which is trying to buy most of Bethlehem Steel Corp.'s assets. Bethlehem's board has approved the $1.5 billion deal, which now goes to U.S. Bankruptcy Court.

Ross and Buffett, investors known as bargain hunters, are competing for a company that once was the world's largest textile maker. The Greensboro, N.C., company owns several assets, including a carpet maker, that analysts say have strong prospects, and management already has begun work on a turnaround.

"Management has made all the right moves and there is now value there," said Fernando Silva, a managing director at consumer products consultant Kurt Salmon Associates in Atlanta. "They've already executed an operation turnaround. The business has changed dramatically."

Burlington, which suffered from high manufacturing costs in the past, now makes its products in India, Mexico and other countries. "They've diversified manufacturing around the world," Silva said.

Ross said holders of more than $120 million in unsecured claims told him to reject the bid. Their stakes plus Ross' $81 million make a majority of unsecured creditors opposing the offer. The board has no "justification" to accept the Berkshire bid, he said in a letter to the board.

Ross, 65, is a former Rothschild Inc. banker who helped reorganize Continental Airlines and Texaco in the 1980s. He formed W. L. Ross & Co. in 2000 to invest in distressed companies after becoming known as Wall Street's bankruptcy king in the late 1980s and early 1990s, when he was involved in such high-profile restructurings as Eastern Airlines, Orion Pictures and Drexel Burnham Lambert.

His opposition to Buffett's bid pits him against another noted bargain-hunter. Buffett, 72, has transformed Berkshire Hathaway from a maker of suit linings to a company with operations ranging from insurance to ice cream. It had $10.6 billion in sales in the third quarter.

Ross said he has spoken to Buffett over the phone about the bid. Ross was the largest unsecured creditor in underwear maker Fruit of the Loom Inc. when Berkshire bought that company in May 2002 and said he was content with the price Buffett paid then.

"Our quarrel is not so much with Buffett as it is with the board of Burlington," said Ross. His letter to the Burlington board of directors said they were attempting a "covert" plan of reorganization.

Ross, who has used courtrooms to thwart rivals' bids before, warned he is contemplating legal action. Calls to Buffett at Berkshire's headquarters in Omaha, Neb., weren't returned.

Berkshire's offer will be subject to higher bids at a scheduled April 21 auction. Burlington will ask the U.S. Bankruptcy Court in Wilmington, Del., to approve auction procedures at a hearing Feb. 27.

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