MILAN--As talks continued into this week, Plaid Clothing Group PLC appears to be rounding the final bend in its bid for GFT SpA, although a sale to Plaid still isn't inevitable, sources familiar with the negotiations said Tuesday. Though a deadline to wind up the deal had been set for last Thursday, sources said, both sides have extended the talks in hopes of reaching an agreement by the end of this week. Reportedly, though, there is at least one other offer for GFT on the table from Mexican entrepreneur Fabio Covarrubias. Moreover, sources speculated that the Plaid-GFT talks have been intentionally dragged out in a last-ditch effort by Mediobanca, the merchant bank here masterminding the GFT financial restructuring, to interest Fiat group's investment company Gemina SpA to make an offer. Both Gemina, which controls Fila sportswear, and Fila have repeatedly denied any interest in bidding for GFT. "It's an extremely delicate situation, but there's still an effort being made to see if the company can remain Italian-owned," said one source close to GFT, "It's clear that GFT is under the watchful eye of the Agnelli family [which controls the Fiat auto group, based, like GFT, in Turin], and certainly the employment situation is one that affects the entire city." GFT employs some 6,500 people in total, with most of the work force in Italy. "It's my understanding that there is a direct discussion going on with Cesare Romiti [Fiat's managing director], who is also a good friend of Marco Rivetti [GFT chairman]," the source added. However, the source said, he did not know the specifics of the talks. There have also been vague rumors in the Italian press of still another but unnamed Italian company that could be a potential buyer. Meanwhile, parties here involved in the negotiations have declined to say anything official. Plaid officials contacted in New York last week acknowledged they had been looking to wind up the talks then. They did not return phone calls Tuesday. While Plaid's exclusive to negotiate for the Turin-based GFT has expired, sources said, its position was strengthened considerably in the past two weeks with financial guarantees from Plaid chairman Omar Al Askari himself, who has intervened directly and is now handling negotiations personally. The sources said he will be in Milan today for a meeting with Mediobanca. Another meeting has been set for Thursday with the GFT creditor banks. "One way or another we should know something by Friday. At this point they have to decide whether they're going to sell it to Plaid or to someone else," one source said. GFT is Italy's largest producer of designer apparel, manufacturing varying categories of merchandise for such names as Giorgio Armani, Calvin Klein, Claude Montana, Emanuel Ungaro and Valentino. With Al Askari personally involved, Plaid's chances of closing the deal seem strong, sources said, though there is still some question about where the money is going to come from. "Al Askari is here, reassuring all the banks that he will come up with the money, but it still isn't clear exactly how," said one financial source. Another source said it was doubtful, though, that Plaid would have pursued GFT for this long without having the means to close the deal. "Both sides have invested so much in the negotiations that neither one wants the deal to fall apart now," said one source. As reported a month ago, GFT's Italian creditor banks were said to have put a chill on Plaid's bid when it tried to put up GFT itself as a guarantee with the banks financing the acquisition. The institutions that have reportedly agreed to help finance Plaid are Prudential Securities and Transamerican, a small, asset-based lender. Though such a procedure is common in acquisitions in the U.S., it isn't legal under Italian law and GFT's lawyers intervened to avert a deal under those terms. As for Covarrubias, sources said the Mexican businessman, who withdrew an offer for GFT in March when Plaid entered the picture, last month made a new bid to buy GFT for $248.9 million (397 billion lire) at current exchange, compared to $244.5 million (390 billion lire) offered by Plaid. Whether Plaid would have to match or better the Covarrubias bid could not be determined. Covarrubias is flanked by Citibank and a group of institutional investors in his bid, sources said. The group led by Covarrubias has "money committed to this deal, should Plaid not be able to come up with the financing," one source said.
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