NEWS

by Maureen Flanagan

In May 1997, American Capital Strategies (NASDAQ Symbol = "ACAS") teamed up with a Maine investment group and the workers and management of Biddeford Textile Company to acquire the company from its corporate parent, Sunbeam Corporation. The transaction was structured and managed by American Capital, who provided $595,000 in equity and arranged $11.5 in total financing. The acquisition rescued the manufacturer of electric blanket shells from becoming a casualty in the corporate-wide downsizing by Sunbeam CEO "Chainsaw Al" Dunlap. It also created a one-third employee-owned company, Biddeford Textile Corporation, saving 370 jobs and renewing the life of a business that had been a mainstay of the local economy since the mid-nineteenth century.

"The efforts of our hard-working Maine employees have made and kept this company a profitable manufacturer of high-quality blankets," said Rene Boisvert, Biddeford Textile's President and CEO. "Now as employees and owners, management and labor working together will make this company the most efficient blanket manufacturer in the world." Boisvert said.

Biddeford's mills have been an economic lifeline of the community since before the Civil War, weathering fires, floods and economic downturns. In 1971, Biddeford Textile's owner, West Point-Pepperell, sold its woven blanket division to Sunbeam. As a Sunbeam subsidiary, the company has made shells for electric blankets (the specially designed blanket that contains pockets for inserting electric wiring) in addition to high-quality conventional blankets. The electric blanket fabric is produced in two Biddeford plants and then shipped to Sunbeam's Mississippi facility where they are wired, packaged and distributed to customers.

Under the direction of Boisvert, Biddeford Textile was a major contributor enabling Sunbeam to beat out other competitors and become the sole electric blanket producer in the North American market. By 1997, the Biddeford division produced about four million shells a year and brought in annual revenues of $40 million. The success was due to the efficiency of the Biddeford plant operations and high quality of the blankets it manufactured.

Even though Biddeford Textile was an integral part of one of the two most profitable divisions of Sunbeam, when Dunlap took the helm in 1996, its fate changed overnight. Making cutbacks to improve shareholder value was a mantra for Dunlap whose cost-cutting measures for Sunbeam included selling or closing 18 factories and eliminating half the corporation's 12,000 jobs. In November 1996, Sunbeam announced that it intended to sell the Biddeford operations and outsource blankets for its electric blanket division.

Responding to the possibility of plant closure or relocation, American Capital joined with representatives of the Union of Needletrades, Industrial and Textile Employees (UNITE) to save the company. "Our Union was committed to fighting to save our members' jobs. We called upon American Capital to work with us, both to save jobs and to win significant ownership and a measure of local control for our members," said Michael Cavanaugh, northern New England director of UNITE."

After several months of negotiations, American Capital worked out a deal to purchase the plant and give employees an ownership stake in the company through an employee stock ownership plan (ESOP). An $11.5 million financing package raised by American Capital was supplemented with an equity investment of $2 million shared between American Capital, the Maine investment group and senior management. For its part, UNITE renegotiated its collective bargaining agreement with the new company. Union members agreed unanimously to wage and benefit concessions totaling 11.5% in return for one-third ownership of the company.

As part of the purchase transaction, Biddeford Textile entered into a five-year agreement to supply shells to Sunbeam's electric blanket division. Sunbeam recognizes that Biddeford is a specialist producer of this product. No other North American company produces blankets of comparable quality and cost.

In addition, Biddeford Textile has expanded sales of its high-quality conventional blankets for retail and institutional customers and continues to develop new products for this market. The company has also introduced a new conventional blanket using a recently developed temperature regulating fabric, which will soon be on the market.

The Biddeford Textile purchase has given a profitable company even more room for expansion. Not only has it made the employees part owners of the company and benefited the local economy, it has turned corporate downsizing and potential loss of jobs into a success story. Biddeford Textile's ESOP saved hundreds of jobs and preserved the heritage of a small New England mill town. "This was more than just a good salvage job," comments John Ireland, a principal of American Capital who was heavily involved in the transaction and now sits on the Biddeford Board of Directors. "Production and employment at the plant have increased and, based on present performance, the employees' stock ownership will be worth substantially more than their pay sacrifice."