The Big Question at Delta Woodside: Spin Off or Sell - Brief Article

Delta Woodside Industries Inc., which last December announced intentions of spinning off its Delta Apparel Co. and Duck Head Apparel Co. divisions into two separate publicly traded corporations, is now facing a potential battle over company direction and ownership.

In recent Securities and Exchange Commission (SEC) filings, Bettis C. Rainsford, company co-founder, current director and a significant shareholder of the company, stated his disapproval of the spin-off strategy, noting concerns over possible shareholder tax ramifications and the liquidity of the spin-off shares.

Rainsford resigned from his Delta Woodside positions of CFO, treasurer and executive vice president in October 1999, and since that time has stated that he is considering buying a controlling stake in the organization. Rainsford currently owns 13.4 percent of the company. According to SEC documents, he has discussed and proposed a variety of alternatives for restructuring Delta Woodside, specifically showing interest in trying to sell (rather than spin off) the Delta Apparel and/or Duck Head divisions.

In the opposing corner and in favor of the spin-off, Erwin Maddrey II, CEO of Delta Woodside, explained to Bobbin: "What we [want] to do is spin off to the stockholders all of the stock of Delta Apparel and Duck Head. So if you had 100 shares of Delta Woodside today, you would still have 100 shares of Delta Woodside after this occurs. ... You also would have 100 shares of Delta Apparel and 100 shares of Duck Head."

Maddrey -- noting that the company attempted to sell the Delta Apparel and Duck Head divisions approximately one year ago, but could not get what it considered a fair price -- also argued that the spin-off strategy would offer each company a better opportunity to grow and ultimately would give stockholders more options. "We have never been successful in getting the financial markets to understand why we are both textiles and apparel. I think the three pieces of paper ... will have greater value than one piece," Maddrey commented.

At press time, Delta Woodside's board of directors had adopted a new set of bylaws containing anti-takeover provisions and an anti-takeover "Shareholder Rights Plan." Known as a "poison pill," such a plan is designed to make it difficult or at least not financially profitable for a person to acquire majority interest in a company.

While Rainsford has argued in SEC filings that the move was created to stiff arm his possible plans, Delta Woodside stated in an Associated Press report that the bylaws were adopted as necessary protection because the company's shares were trading at all-time lows.

COPYRIGHT 2000 Miller Freeman, Inc.
COPYRIGHT 2000 Gale Group