An auction of Furniture Brands International Inc.’s assets originally scheduled for today was canceled because only one qualified bid was received by Wednesday’s deadline.
The U.S. Bankruptcy Court for the District of Delaware announced late Wednesday that no other qualified bids were received other than that of stalking horse bidder KPS Capital Partners. A stalking horse typically sets the floor for a potential auction bid.
Samson Holding Ltd., the top stakeholder of Furniture Brands, said it would not bid for the company’s assets, with a change in the date of the auction playing a key factor in its decision.
On Oct. 2, U.S. Bankruptcy Judge Christopher Sontchi had approved a $280 million bid by KPS to be the stalking horse for the assets. At that time, the auction date was set for Dec. 10.
Samuel “Sammy” Kuo and his wife, Grace Liu, said in a regulatory filing Nov. 1 that they and Samson affiliates intended to submit a bid “with terms that are the same or better than the stalking-horse bidder.”
In response, Furniture Brands exercised on Nov. 6 its option to move up the auction date.
Mohamad Amini, executive director of Samson and president of its Lacquer Craft manufacturing arm, said Wednesday the company “has worked around the clock for the past several weeks” preparing a bid. He said the accelerated pace of the bankruptcy proceedings kept Samson for participating in the stalking-horse process.
"We dedicated a lot of resources – financially and management time – but the process was made very challenging,” Amini said. “With the time being shortened and the amount of work we had to do, we couldn't feel comfortable moving forward.”
The potential entrance of Samson as a bidder had heartened creditors and pensioners of Furniture Brands.
Furniture Brands has more than $200 million in underfunded pension obligations for about 20,000 participants, many of whom live in the Triad and Hickory area.
Samson acquired a 14.9 percent stake in Furniture Brands in October 2007 after the company rebuffed its plan for a possible “business combination” in July 2007. That stake has shrunk to 9.5 percent, or 764,269, as the couple has sold about 268,000 shares in recent months.
Amini said Samson may make further comment about the bidding process at a later date, citing confidential agreements.
Furniture Brands filed for Chapter 11 protection Sept. 9 with 19 companies listed as debtors, including three each connected with North Carolina-based divisions Broyhill Furniture Industries Inc., HDM Furniture Industries Inc. and Thomasville Furniture Industries Inc.
"We certainly hope something can be put together soon so that there can be some sort of certainty as to a plan of action for them,” said Ken Smith, director of furniture services for Smith Leonard PLLC, a financial services company based in High Point.
"This will help vendors and customers, as well as employees. While nothing may be absolutely certain for a while, at least some plan needs to be put out there.”
The KPS offer was $20 million more than an earlier bid by Oaktree Capital Management, the preferred stalking horse of Furniture Brands management. KPS took over Oaktree's debtor-in-possession financing obligations, and Oaktree did not choose to participate in the auction.
Amini said Samson “still considers the brands to be important brands for the industry.”
Analysts said Samson would have shifted Furniture Brands’ production to its plants as part of improving efficiency and lowering costs.
"We still feel like with our manufacturing strength and our understanding of the industry, we could bring a lot of win-win synergy for us and the brands,” Amini said. “We will consider opportunities in the future if there is a chance for us to discuss it under different circumstances.”
Furniture Brands in the early 2000s was the largest U.S. furniture manufacturer at $2.2 billion in annual sales, primarily from Broyhill, HDM and Thomasville.
But it had seen eight years of revenue declines, according to John Baugh, an analyst with Stifel Nicolaus.
In the past 12 years, Furniture Brands has eliminated at least 8,860 jobs in North Carolina, including at least 2,874 in the Triad, in pursuit of lower labor costs in Asia that have not contributed to increased sales.