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Cotton merchants Allenberg, Dunavant negotiating merger... Memphis Commercial Appeal
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By Tom Bailey Jr.
Dunavant Enterprises, a regal name in Memphis cotton, could be sold to Allenberg Cotton Co. by month's end.
"We hope to close (the sale) by Aug. 31," confirmed Billy Dunavant, the 76-year-old chairman of Dunavant Enterprises.
His success in cotton grew deep into the fiber of Memphis.
Dunavant inherited the company from his father 48 years ago and became a global cotton magnate with a huge local presence.
The first to sell U.S. cotton to China in 1973, he created a worldwide market for the domestic fiber.
In Memphis, Dunavant has given untold millions to philanthropies, tried and failed to bring an NFL team to the city, succeeded in luring Ducks Unlimited's headquarters with a $1 million donation and, by founding The Racquet Club, brought top pro tennis tournaments to town.
News of the possible deal between the competitors emerged Thursday.
"As we enter the due-diligence phase and begin discussions with banks and employees, it became necessary to be able to inform more parties," said Joe Nicosia, CEO of Allenberg Cotton.
Both companies are international cotton merchants involved in the buying, selling, handling, warehousing and transporting of cotton around the world.
Allenberg Cotton, based in Cordova, is the world's largest cotton merchant, handling more than 7 million bales a year, Nicosia said.
It is a division of Louis Dreyfus Commodities, an international commodity trading firm.
Allenberg's annual revenue is about $2 billion and Dunavant's is about $1.5 billion, The Wall Street Journal reported Thursday.
The transaction is being couched as a merger, Nicosia said, but added, "the ongoing entity would be continuing under the Louis Dreyfus and Allenberg name."
"In the last 18 months the cotton industry has undergone many changes worldwide," he said. "We are happy and proud to be involved in this potential transaction."
Dunavant declined to say why he wants to sell.
"I'm not going to elaborate. ... We got other businesses we really want to get heavily involved in, real estate and logistics."
But Dunavant's sale to Allenberg would underscore "the untenable situation that developed mostly as a result of extreme volatility from last year's runaway markets," Mike Stevens, a Swiss Financial Services analyst, told the Bloomberg business wire Thursday.
At least three other big cotton merchants faced financial troubles after the benchmark cotton price in New York jumped to a 12-year high in March 2008 and then plunged, Bloomberg reported.
But Dunavant vehemently said his company is not in any financial trouble, but is "financially sustainable, financially secure."
He did acknowledge that the firm's "volume" had dropped and that 15 employees had been laid off.
"My boys want to do something different," he said of three sons who serve as CEO, senior vice president and vice president. "I don't want to do a dadgum thing."
In fact, Dunavant said he was leaving this morning for his ranches in Montana.
"I think it's going to happen," he said of the sale. "But I don't know that."
A sale is a "very good decision for Dunavant Enterprises, and it will be a very good purchase for Louis Dreyfus Commodities."
Dunavant Enterprises has "things in our worldwide operation they are not strong in," he said.
"We are certainly in areas of the world they are not. This gives them a complete presence in all global cotton operations."
A sale would be nothing but positive for Memphis, he said.
"The family will continue to live in Memphis and Louis Dreyfus, known as Allenberg in Memphis, they have a strong presence here. I don't see anything negative if the sale takes place," Dunavant said.
Dunavant Enterprises' Memphis headquarters employs 70 to 80 people who perform a variety of jobs, including exports, traffic, classing and warehousing, he said.
Many would be hired by Allenberg Cotton, he said, adding: "That's their decision, not mine."
— Tom Bailey: 529-2388 |
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