NEW YORK — Dissident Cone Mills Corp. director Marc Kozberg on Wednesday denounced the company’s proposal to sell its assets to bankruptcy baron Wilbur Ross in a deal that would wipe out shareholders’ equity.

As reported, Kozberg, who represents a group of investors holding a roughly 9.5 percent stake in the company, had already been engaged in a proxy fight with the directors of the Greensboro, N.C.-based textile concern. His group has mailed out proxies urging shareholders to elect a slate of three new outside directors at the company’s annual meeting next week, rather than the incumbents backed by the board.

In a statement, Kozberg said, “We find it particularly disturbing that Cone Mills concluded so early in the process that it does not expect there to be any recovery for the company’s shareholders, effectively destroying any remaining shareholder value in the company. Why would any shareholder vote for the company’s nominees when the current board and management has shown that they are willing to accept a proposed transaction structure that effectively eliminates all interest of the company’s common shareholders?”

As reported, the proposed transaction, which needs to be approved by Cone’s board, calls for the mill to file a Chapter 11 bankruptcy petition, after which Ross’s firm, W.L. Ross & Co. would buy the company’s assets. This includes one mill in Mexico and five in the U.S.

A source with knowledge of the situation called Kozberg’s quest “Quixotic” in light of the company’s deteriorating financial situation. According to the source, the company expects to emerge from the third quarter with cash flow of of only about $4.8 million, a result of falling sales and deteriorating margins. That’s also little more than the $4.1 million missed interest payment Monday that Cone said in its Tuesday statement makes the bankruptcy necessary.

The source said that between debt and preferred stock, the struggling mill has about $220 million in priority claims that, in a bankruptcy filing, would have to be met before common shareholders’ claims were addressed. Given the deteriorating domestic textile market, which is attracting few investors, the source said it was a “long shot” that shareholders would recover their money anyway. The source argued that it is the responsibility of a director not just to protect shareholders, but to also consider the needs of creditors and of Cone’s 3,000-plus employees.While neither Cone nor Ross disclosed the proposed purchase price for the mill, another source close to the situation said it was less than $100 million. Cone’s market capitalization as of Monday, the last time its shares changed hands, was $27 million. Its book value on June 29 was $89.3 million, according to a recent Securities and Exchange Commission filing.

If the cancellation of Cone’s shares is approved by the bankruptcy court, the move would cost Kozberg and the other members of its group about $2.7 million, based on the closing price of Cone shares in New York Stock Exchange trading Monday. Following the announcement Tuesday of the Ross deal, the Big Board halted trading in Cone shares and moved to delist the stock.

Ross has also agreed to buy Burlington Industries Inc., once the world’s largest textile company, out of bankruptcy. That deal is expected to close next month and Ross said he intends to merge the two mills if his bids are successful. Sources said the combined entity would be the largest denim supplier in North America.

Kozberg said, “Cone’s announcement confirms our suspicion that W.L. Ross & Co, which is one of the company’s largest creditors, as well as the owner of one of the company’s largest competitors, and Cone management are seeking to consolidate the denim industry at the expense of Cone Mills shareholders, its other creditors and employees.”

He urged shareholders to vote for the group’s slate of proposed directors, who are Charles L. Barry, a fan-industry executive; Randall G. Kominsky, president of the Alliance for Financial Growth Inc., a consulting firm that has worked for Cone, and Jess M. Ravich, president and chief executive officer of Libra Securities, an investment-banking firm.

Cone’s nominees are sitting directors Jeanette Cone Kimmel, who has been on the board 32 years; David T. Kollat, who the proxy describes as a marketing expert, and John W. Rosenblum, the former dean of the University of Virginia Darden Graduate School of Business Administration.

There are 11 total directors on the Cone board, including Kozberg.

Each side has mailed out competing proxy cards for shareholders to use to vote at the Sept. 25 meeting. The Kozberg group’s card is green, the card sent by the current board is white.Cone officials have been highly critical of Kozberg, who has been on the board since 1999, and his nominees. In its proxy statement, the Cone board said, “Kozberg’s nominees’ experience in our industry is limited and unrelated to our core business. We do not believe that they have suggested any realistic plan for the company to deal with the pervasive problems facing Cone Mills and the U.S. textile industry.”

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