LifeStyle breaking up

Furniture Brands to get big chunk

By Jay McIntosh -- Furniture Today, December 9, 2001

HIGH POINT — Furniture and fabric conglomerate LifeStyle Furnishings International last week said it would break up its remaining holdings into four pieces in three separate transactions.

The moves will bring to an end the concept launched 15 years ago by Masco, LifeStyle's former owner, which once hoped to achieve synergy and high performance by assembling a stable of manufacturers.

Three transactions are pending:

• Furniture Brands International, owner of Broyhill, Lane and Thomasville, will buy Drexel Heritage, Henredon and Maitland-Smith for $275 million in cash and stock. The acquired companies have annual revenues of about $425 million, according to Furniture Brands.

• Management of Berkline and BenchCraft will lead a buyout of those companies, which together have annual sales of about $450 million, LifeStyle said.

• Management of Sunbury will lead a buyout of the high-end textile producer, which has sales of about $50 million.

LifeStyle will keep furniture producer Lexington Home Brands, fabric company Robert Allen/Ametex and the Beacon Hill designer showrooms, which together have sales of about $500 million.

"This puts each of our companies in a great position … to be highly competitive, entrepreneurially focused and financially sound," said Alan Cole, who will remain chief executive officer of LifeStyle.

He said proceeds from the sales will enable LifeStyle to retire its bank debt, leaving only some debt to Masco, which still is a part-owner of LifeStyle.

Rumors have long circulated about the sales, which Cole said have been in the works for months. Mickey Holliman, Furniture Brands' chairman and CEO, said his company and LifeStyle have been talking since May.

Current management is expected to remain in place at each of the companies. Furniture Brands said it has no intention at present to make any changes.

Furniture Brands' deal is likely to once again make it the largest U.S. furniture manufacturer, a position La-Z-Boy captured in 2000 after its acquisitions of Ladd and other companies. With the acquired companies, Furniture Brands' sales this year would have been about $2.3 billion, compared with a projected $2.1 billion for La-Z-Boy for the 12 months ending in January.

LifeStyle, once the third-largest producer, will fall to seventh or eighth, with Klaussner or Ashley rising to third.

The deals will finally unwind most of the work Masco did in assembling its Home Furnishings Division in the 1980s and early 1990s, when it brought together some of the industry's top brands with a focus mainly on upper-medium to high-end goods.

Masco paid high prices — a combined $650 million for Drexel Heritage and Henredon in 1986, for example, compared with the $275 million that Furniture Brands will pay for those two companies plus Maitland-Smith.

Unable to bring profit margins anywhere near those of its other businesses, Masco sold a majority ownership in the furniture and fabrics division in 1996 to the division's management, backed by a Citicorp Venture Capital fund. The $1.1 billion deal left Masco with a 15% equity stake, $708 million in cash and some debt.

The newly created company, called LifeStyle Furnishings International, said in 1998 that it would make a $460 million initial public offering of stock to help retire its debt. But it dropped those plans the next year as the IPO market softened.

This summer, LifeStyle sold case goods importer Universal to China-based Lacquer Craft for an undisclosed amount. Universal, based in High Point, is using Lacquer Craft's substantial manufacturing capacity in China.

Six weeks ago, Masco took a $460 million writedown on the value of its remaining stake in LifeStyle, mainly in the debt and accrued interest it was owed.