The merger, which was unanimously approved by the boards of both companies, is subject to stockholder approval at each company, regulatory approvals and other customary closing conditions. The cash portion of the transaction will be financed through a combination of existing Mohawk credit facilities and new debt. The transaction is estimated to be completed in the first quarter of 2002.
Commenting on the proposed merger, Jeffrey S. Lorberbaum, President and Chief Executive Officer of Mohawk stated, "The Dal-Tile merger gives us the opportunity to expand our hard surface business and become a leader in the ceramic tile sector. With approximately $1 billion of annual sales through Dal-Tile's distribution channels of company-operated service centers, independent distributors and home center retailers, we will offer the most comprehensive line of ceramic tile and stone products in the industry. Their Daltile and American Olean brands are two of the most respected brands in the industry. The strong sales growth and operating margins of Dal-Tile over the last four years reflect the superior performance of the current operating management team. We look forward to bringing Dal-Tile into the Mohawk family and to the strategic growth opportunities this merger offers. We intend to nominate two persons designated by Dal-Tile to our board and plan to keep the Dal-Tile operating management team intact. The strengths of both companies are complementary and our strategies are consistent. Mohawk and Dal-Tile have the most recognized brand names in the carpet and tile industries, with an emphasis on low cost manufacturing, strong marketing programs and broad product lines. By working together to identify synergies, our two companies will be able to continue to increase shareholder value as one combined company. Although we do not expect to realize significant synergies in the first year after the acquisition, we will be laying the foundation for future opportunities through the integration in 2002 and anticipate slight accretion next year from this transaction before the impact of any synergies. Some of the opportunities we are most excited about include (1) leveraging customer relationships, (2) utilizing Dal-Tile's Mexican management team for increasing the sales of Mohawk products in Mexico as well as potential manufacturing in Mexico of Mohawk products, (3) leveraging the two companies' logistics and distribution systems and (4) identifying best practices for manufacturing systems and procedures at each company to improve both."
Jacques R. Sardas, Chief Executive Officer and Chairman of the Board of Dal-Tile stated, "Over the past four years we have achieved constant improvements in sales, earnings and cash flow. The proposed merger represents the ideal culmination of our efforts and the dedication of all our employees, as well as the support we received from our stockholders, customers, lenders and suppliers. The combined company will have the opportunity to create a formidable organization in the floor covering industry. The new organization will have the opportunity to access new and higher business horizons, which should provide an opportunity to expand sales growth, and improve earnings and cash flow. We are looking forward to the proposed merger and to becoming part of the Mohawk family. We are impressed by Mohawk's strong financial performance, their business acumen, leadership and professional management. The proposed merger will benefit Mohawk's and Dal-Tile's stockholders, customers and employees."
All of the directors and several of the executive officers of Dal-Tile, including Mr. Sardas, have agreed to support and to vote in favor of the transaction at the Dal-Tile stockholders' meeting. Aladdin Partners, L.P., a partnership controlled by Mr. Lorberbaum and his family, has agreed to support and to vote up to 9.9 million shares of Mohawk stock in favor of the transaction at the Mohawk stockholders' meeting. Wachovia Securities Corporation and Credit Suisse First Boston Corporation are acting as financial advisors and will provide fairness opinions regarding the transaction for Mohawk and Dal-Tile, respectively. Alston & Bird LLP and Vinson & Elkins LLP are acting as legal counsel for Mohawk and Dal-Tile, respectively.