Opinion ID: 659
Heading Depth: 2
Heading Rank: 3

Heading: The Bid for Control of the Debtor's Business

Text: The auction was held on June 23, 2005. To solicit bids, the Debtor contacted 111 potential bidders and published a notice of sale in the Wall Street Journal and The New York Times. At the auction, however, the Contrarians and Aretex were the only two parties present. The auction commenced with Aretex's bid being the baseline bid, which, applying a control premium of 25.8%, was valued at approximately $617.1 million. [4] Aretex's bid structure essentially was composed of securities of WestPoint International for consideration, with an additional payment of $165 million cash for a 17.5% interest in WestPoint International. In response to Aretex's bid, the Contrarians submitted a provisional bid valued at approximately $621.6 million. [5] The Contrarians' provisional bid structure differed from Aretex's, in that it was composed of a credit bid by Beal Bank and a subsequent exchange of securities in New Textile Co.  the vehicle corporation created by the Contrarians to acquire the Debtor's business  for the assets purchased by the credit bid. This bid structure was generally identical to the Contrarians' stalking horse proposal. The Contrarians indicated that, upon their taking control of New Textile Co., they were prepared to provide minority [shareholder] protections. After some disagreement about whether a provisional bid should be permitted to compete with Aretex's unconditional bid, Aretex submitted a new bid raising its purchase price for a 17.5% interest in WestPoint International to $170 million  an increase of $5 million. This new bid was valued, applying the control premium of 25.8%, at approximately $639.8 million. Unlike the Contrarians, Aretex indicated that its bid would not provide minority [shareholder] protections other than what is required by law. Thereafter, the Contrarians asserted that they would continue to bid; however, in the event they did not emerge the winning bidder, they reserved the right to argue that their initial provisional bid was higher and better. The Contrarians accordingly set aside their credit bid and bid in a structure identical to that proposed by Aretex, except that the Contrarians would purchase 7.75% of the stock of New Textile Co., the Contrarians' vehicle company (as opposed to Aretex's purchase of 17.5% of WestPoint International, Aretex's vehicle company), to secure control of the Debtor's business; the Contrarians new bid was valued at approximately $650.1 million. Aretex then submitted a bid that increased its purchase price for 17.5% interest in WestPoint International to $180 million, raising the value of its entire bid to approximately $677.3 million. The Contrarians responded by raising their bid but emphasizing that when [the] dust all settles, we must end up with 50.1 [percent;] that is obviously incorporated into our proposal. The Debtor rejected the bid because it was not able to confirm that it could meet the condition that the [Contrarians] would retain 50.1 percent of the ownership of [New Textile Co.]. The Contrarians protested that obtaining a controlling interest in the vehicle company acquiring the Debtor's business was one of [Aretex's] conditions for their bid. The Debtor explained that Aretex can meet the condition based on their [bid] structure.... [However,] based on how we evaluated your [(the Contrarians')] bid, we cannot meet the 50.1 [percent] minimum condition. The Contrarians then ceased to bid. Aretex responded by increasing its bid once more, raising its purchase price for 17.5% interest in WestPoint International to $187 million and thus raising the value of its entire bid to approximately $703.5 million. Apparently dissatisfied with lawyers placing unnecessary provisions in the bids, Carl Icahn, on behalf of Aretex, indicated that the provision protecting any right [of Aretex] to buy additional shares [to guarantee control over WestPoint International] would be stricken. As explained in a subsequent hearing, Aretex stated that it was comfortable with the math [that it would own more than 50% of WestPoint International]. The auction accordingly concluded with Aretex emerging as the winning bidder. The Debtor and Aretex thereafter prepared an Asset Purchase Agreement incorporating the terms of the sale in accordance with the bid. In the subsequent hearings held on June 24, 2005, and June 29, 2005, the Debtor sought to have the Asset Purchase Agreement approved by the Bankruptcy Court. After hearing testimony from witnesses and observing that the auction was well-publicized, open, fair, and between sophisticated parties, each with their own professional advisors, the Bankruptcy Court approved Aretex's purchase of substantially all the [Debtor's] assets, in effect of the [Debtor's] business.