Foamex International Inc. is preparing to swap its carpet cushion operations for Leggett & Platt Inc.'s polyurethane foam business.
The companies announced June 18 they have signed a letter of intent for the switch, with Linwood, Pa.-based Foamex also making an unspecified cash payment as part of the arrangement. They did not discuss details.
The carpet business manufactures and distributes underlay products, while the Leggett & Platt business focuses on products for the bedding, furniture and consumer products industries.
The two companies must complete agreements related to the sale of scrap and prime foam and the temporary sharing of facilities as part of the final transaction. They did not specify a completion date.
Foamex has been reshaping itself this year, with plans to close eight of its 67 facilities and cut 600 employees from its total work force of 6,000 by the end of 2002. The trade with Leggett & Platt of Carthage, Mo., would shed one of Foamex's noncore business units, while focusing on its larger PU foam operations, according to spokeswoman Denise DesChenes.
``Besides providing us an opportunity to continue to de-leverage our balance sheet, this deal would provide us with additional scale in our foam business, our core competency, while increasing our raw material purchasing leverage,'' she said.
Last year Foamex's foam business accounted for nearly $500 million of its total sales of $1.25 billion. It also had profit of $66.3 million, compared to a $5.6 million loss for the full company.
The carpet cushion unit had a loss of $6.8 million for the year, on sales of $231 million.
In addition, Foamex is expecting further hits to the carpet cushion unit this year, it noted in its May 14 quarterly report, with increasing material costs for scrap foam, and the loss of a prime contract when retailer Sears Roebuck & Co. announced it would withdraw from the carpet market.
Leggett & Platt, with a product portfolio ranging from injection molded and metal-formed items to residential furniture, listed sales for the 2001 fiscal year of $4.11 billion and a profit of $187.6 million.