Parent of Fruit of the Loom Bids $1.4 Billion for Pepperell

CHICAGO — Farley Inc., parent of the Fruit of the Loom underwear company, announced Monday a $1.4-billion takeover bid for West Point-Pepperell Inc., the big sheet and towel maker that swallowed up rival J. P. Stevens & Co. in a hostile deal only six months ago.

Farley, one of the nation’s largest privately owned conglomerates, said it would pay $48 a share in cash for each of Pepperell’s 29.4 million outstanding shares, but industry analysts characterized the bid as low.

“It’s worth more,” said Grace Taferner, an analyst with First Manhattan Co. in New York. “I think it should be about $55 per share.”

Patricia Ryan, an analyst at Raymond James & Associates in St. Petersburg, Fla., agreed. “A good number would be $55,” she said, adding that “I don’t think you make your best bid first.”

In trading Monday on the New York Stock Exchange, Pepperell rose $4.75 a share to $50--or $2 a share more than the offer.

Pepperell, based in West Point, Ga., advised its stockholders not to take any action until its board reviewed Farley’s bid and made a recommendation. Spokesman Donald Downs said the board would meet by Nov. 4.

William Farley, who heads the Chicago-based concern making the bid, said in a letter to Pepperell Chairman and Chief Executive Joseph L. Lanier Jr. that he hoped to “move forward on a constructive, friendly basis.”

“We think it’s an attractive offer to the shareholders, for sure,” Farley said. “In the South, you hear a lot of groaning about the textile and apparel industries in America, how badly they’ve been hit by foreign imports. From our perspective, we have been very successful in it. The same can be true of West Point-Pepperell.”

The offer was not entirely unexpected. In May, Farley sought government permission to acquire up to 25% of Pepperell’s stock. So far, Farley has spent $88 million for a 9.8% stake in Pepperell.

Farley said Lanier had telephoned him months ago “and indicated he preferred to remain independent.”

Pepperell, which manufactures Arrow shirts and Martex towels, acquired textile rival J. P. Stevens & Co. earlier this year for $1.2 billion and then split up Stevens’ assets with a rival suitor. Pepperell was left with most of Stevens’ linen and towel operations, giving the company about 25% of the nation’s home fashion textile market.

Analysts predicted that Farley would not keep Pepperell intact.

“The breakup value is worth more than keeping the company together,” Taferner said. “He’s (Farley) said he wants the bed and bath business, which is the jewel of the company. There are a lot of buyers for the businesses that he doesn’t want. He should be able to sell them off fairly easily.”

In a filing with the Securities and Exchange Commission, Farley said that, if successful in its bid, it plans to sell Pepperell’s apparel fabrics and industrial fabrics businesses and keep the household fabrics business.

Farley has already taken legal action to challenge Georgia’s anti-takeover statutes as well as Pepperell’s “poison pill,” a measure designed to discourage hostile bidders.