Furniture Brands looked at 2011 sale, spurned earlier offers
Amidst Furniture Brands‘ Chapter 11 bankruptcy filing and a slew of other filings and information coming out since Monday comes this tidbit: The company had asked investment bank Goldman Sachs to look into the possibility of selling its business in 2011.
Goldman Sachs contacted more than 15 potential candidates, but apparently none were interested. The reason? According to Furniture Brands’ chief financial officer Vance Johnston in a declaration, “potential purchasers expressed concern over potential legacy pension liability and/or only desired to acquire discrete assets of the company.”
Furniture Brand’s pension liability is about $200 million.
“It later became clear that an out-of-court solution to the debtors liquidity issue would not be available,” Johnston said.
In the two years since that time, it only got worse for Furniture Brands.
In August, it hired a team of restructuring attorneys and advisers, and it didn’t take long for them to determine this:
After considering all available options, (Furniture Brands) determined that pressing liquidity constraints resulting from decreased sales, burdensome long-term debt obligations and legacy person liabilities was impeding (our) ability to implement successful operational imporovents and participate in out-of-court restructuring.
While Oaktree Capital Management has made an offer to buy most of Furniture Brands’s assets for $166 million, Furniture Brands received two other offers, including a group that had provided earlier credit facilities as well as an unnamed third-party. But Furniture Brands picked Oaktree bacause it felt it provided more liquidity, more flexibility and better terms.
Still, other higher bids could still come for Furniture Brands assets – excluding Lane.
In Johnston’s declaration, he said Furniture Brands expects to sell Lane within 30 days and the rest of the company’s assets within 140 days.
Hindsight is always 20/20, but Furniture Brands could considered other proposals.
In 2008, Sun Capital made an offer to buy Furniture Brands at a “premium” offering $14 to $16 a share. Even after securing some seats on Furniture Brands’ board in a proxy battle, Sun was unable to convince the company to accept its offer.
Sun said it was “extremely concerned” about Furniture Brands’ restructuring efforts, and said the company was over-leveraged. When Sun made its offer, Furniture Brands’ market capitalization was about $675 million.
Furniture Brands said it was concerned about Sun’s uneven performance in other furniture industry acquisitions. It also said Sun’s portfolio at the time also included industry competitors.
Prior to Sun’s offer, in late 2007, Samson Holdings of Hong Kong, which then owned some 13 percent of the company’s shares, had inquired about a merger of some kind. Samson is one of China’s largest furniture conglomerates. That offer, obviously, was rebuffed as well.
Any restructuring moves don’t seem to have worked:
• Since 2008, Furniture Brands’ performance has been abysmal. In 2008-2009, the company lost a combined $524 million.
• Losses since then: $109 million in 2009, $39 million in 2010, $43 million in 2011 and $47 million last year.
• Shareholders’ equity in 2008 was $366 million; last year it had fallen to $54.8 million. Today, the shares are basically worthless.