Textron Sale of Plastics Unit to C&A Moves Forward

December 4, 2001

Sacramento - Some creative financing has saved the sale of Textron's Automotive Trim unit to Collins & Aikman. The two agreed on August 7 on the sale of the business, worth $1.34 billion. That deal already had some creative financing involved to make it affordable for C&A with its majority shareholder Heartland Industrial Partners agreeing to accept 32 million shares of common stock to back the $1 billion purchase price. However, pulling together those kinds of funds in a crumbling economy is difficult, and then after the events of Sept. 11, it became impossible. By mid-October insiders on the sale said it looked like the deal was grounded.

Textron announced yesterday that it has come to terms with C&A in a revised agreement that reflects the changed economic circumstances. Under these revised terms, Textron will receive $800 million in a combination of cash, a transfer of indebtedness and a lease financing deal. Textron additionally will receive preferred shares of C&A with a face value of $326 million, plus 18 million shares of C&A common stock. Textron will retain a 50% interest in an Italian joint venture with the option to sell the j-v to C&A at a future date for $23.1 million.

The lease financing deal is curious but is reported to involve about $87 million of equipment used by Textron's Automotive Trim unit. This equipment will be retained by Textron and leased back to the business through Textron Financial Corp. The agreement also includes a provision that entitles Textron to an additional cash payment of up to $125 million that will be calculated on C&A operating results for the five-year period ending 2006.

Obviously, a major difficulty in closing the sale was the reluctance of banks to advance money on a business that was experiencing the worst economic downturn in over a decade. Textron is now betting on the future of the business and C&A's ability to make it profitable.

For Textron it is a good deal and accomplishes the company's stated objective of reducing the amount of exposure it has with respect to the automotive industry. With the Automotive Trim business sold, automotive will represent about 9% of Textron's total business.

For C&A, probably the heaviest investor in the automotive industry during 2001 with several major acquisitions, the buy virtually doubles its interiors business and makes the company a real serious player in Detroit and abroad.

Textron said it expects to close on the sale before year-end.