Textron is to proceed with the sale of its automotive trim business to Collins and Aikman Products, a subsidiary of Collins and Aikman Corporation, under terms which have been revised to reflect changed economic circumstances.
Under the revised terms, Textron will receive $800 million in a combination of cash, a transfer of indebtedness and a lease financing. In addition, Textron will receive preferred shares of Collins and Aikman with a face value of $326 million and 18 million shares of Collins and Aikman common stock. Textron will also retain a 50% interest in an Italian joint venture, which Textron will have the right to sell to Collins & Aikman for $23.1 million at a future date.
As a result of this transaction, the company intends to repurchase shares and reduce debt by about $700 million consistent with its current debt ratings.
The agreement also includes a provision that entitles Textron to an additional cash payment of up to $125 million to be calculated based on Collins and Aikman’s operating results for the five year period ending 2006.
The lease financing involves approximately $87 million of equipment used by the Automotive Trim business that will be retained by Textron and leased back to the business through Textron Financial Corporation.
Textron initially announced the sale of its Trim unit to Collins and Aikman in August. Collins and Aikman’s ability to finance the purchase was delayed when the impact of the events of September 11 interrupted liquidity in US high yield debt markets.
The recent restoration of liquidity in the high yield sector should allow Collins and Aikman to return to the market for financing. This transaction is contingent upon Collins and Aikman being able to raise $325 million in a bond offering.