Carl Icahn and Wilbur Ross are friends. The veteran corporate takeover artists are close enough that Icahn was among the invited guests at the reception for Ross’s wedding last October to socialite Hilary Geary. But recently, the two put their friendship aside to go to war over bankrupt textile maker WestPoint Stevens, which was auctioned on June 23 in the New York offices of the company’s law firm, Weil, Gotshal & Manges.
For months Ross looked like a sure winner. He made a killing last year by selling a group of bankrupt steel companies that he’d turned around to Indian entrepreneur Lakshmi Mittal for more than $4 billion, and he was looking to execute a similar roll-up in textiles. Several hedge funds that owned WestPoint’s bank debt recruited him in February to buy the company.
Ross promptly made a $687.7 million bid for the Georgia maker of bedroom linens (including a line endorsed by Martha Stewart), which went bankrupt in June 2003 with more than $2 billion in liabilities. Icahn quickly emerged as a challenger, having bought a big position in the company’s debt.
With no other interested bidders, the two men walked into Weil Gotshal’s offices ready to do battle. They briefly swapped pleasantries, then engaged in several hours of bids and counterbids, after which the board accepted Icahn’s $703.5 million offer. A bankruptcy court judge approved the sale seven days later.
The hedge fund creditors are appealing that ruling, arguing that WestPoint’s bankers at Rothschild undervalued Ross’s bid. But Ross (who was traveling and unavailable for comment) has said he’s moving on to other opportunities. And the scuffle doesn’t appear to have damaged his friendship with Icahn.
“I certainly respect Wilbur, and it was nothing personal,” Icahn tells Institutional Investor. He is injecting $187 million of equity into WestPoint in hopes of turning it around. “I believed it had potential, but it was too debt-burdened and needed an infusion of capital.”
