By David Gill
NOIDA, India–As it apparently is moving to shut down its Dan River operation in the United States, GHCL is planning to grow its U.S. home textiles business to between $400 million and $500 million annually by this time next year.
Its current annual U.S. home textiles sales—which included Dan River and institutional suppliers H.W. Baker Linen Co. and Best Textiles, the latter two of which will continue to operate—are $275 million. If GHCL reaches that goal, it would represent growth of from 50 percent to 80 percent.
A GHCL statement said Dan River, which filed for Chapter 11 bankruptcy protection on April 18, is being shut down. The statement added that its restructuring plan entails shifting the business Dan River conducted, both for the U.S. and the international markets, to Fabient, its wholly owned subsidiary in India. GHCL has already shifted its sourcing for the 300 stores of Rosebys, the United Kingdom-based retailer, from Dan River to Fabient.
GHCL plans to directly service U.S. home textiles retailers through what it describes as its “strong global network,” which encompasses vendors in India, Pakistan and China. The company has manufacturing facilities in India, Cambodia and Mexico, and works with 40 designers throughout the world.
Also in the cards are an increase in the company’s exposure to the institutional home textiles business and efforts toward making its pricing more competitive for U.S. retailers.
“For this, we are moving away from the Dan River business of supplying goods CIF [cost, insurance and freight],” said Sanjay Dalmia, GHCL’s chairman. “Instead, we will now supply at FOB prices, as these are much more competitive and also help in monitoring and controlling logistics costs, at a time when the demand in the U.S. market is very low.”
The move from Dan River to Fabient should also steer the U.S. market away from conflicts and confusion, the company said, because both entities target common customers. Dan River moved into the institutional business with its acquisition of H.W. Baker in December 2006, and of Best Textiles in February 2007. Neither of these holdings are involved in the Chapter 11 filing, and will continue operating going forward.
Meanwhile, controversy continues to surround Dan River as it moves toward liquidating its business. In late April, Pakistani exporters of towels appealed to the Pakistani government to take action against the U.S. company, stating that Dan River had stopped paying them for goods supplied.
According to a statement from the Towel Manufacturers Association of Pakistan, more than 400 containers of these goods, worth $20 million, were stuck in U.S. ports. Exports worth more than $30 million from 24 suppliers are at stake, the association said.
The exporters asked the Pakistani government to take up this matter with the Pakistani High Commission in New Delhi, India, and with the Indian High Commission in Islamabad, Pakistan.
In Dan River’s Chapter 11 filing, its largest unsecured creditor is the city of Danville, Va., its headquarters location, which the company owed nearly $2.3 million. Also on the unsecured creditors list are two former Dan River executives: Joseph Lanier Jr., the former chairman and chief executive officer, who is owed $431,250; and Daniel Hammer, former executive vice president, who is owed $550,000.
The liquidation of Dan River would remove one of the nation’s most venerable suppliers of home textiles. The company was founded in 1882 and grew to become a leading supplier of apparel fabrics and home fashions, and became one of the textiles industry’s major U.S. mills. In 1999, it grew from its acquisition of The Bibb Co., another major mill.
Since then, financial difficulties beset the company. It was forced to file Chapter 11 in March 2004 and emerged from bankruptcy in February 2005. GHCL acquired the company in December 2006. In 2007, the court documents said, Dan River pulled in net sales of nearly $195.3 million.
In September 2007, Dan River hired longtime textiles executive Herb Briggs as its president. Briggs left this post in March, shortly before the company’s second Chapter 11 filing, to become a managing partner at Hunt Private Equity Group in Dallas.
A U.S. executive, who called the relationship between GHCL and Dan River “a messy thing,” speculated that GHCL may look to make another acquisition to push its plans forward, perhaps even a retailer. “That’s how he operates,” he said, referring to Dalmia. “He buys troubled companies because he can get them cheap, and there may be opportunities for him now.” — Reena Mital contributed to this report.