NEW YORK — In another case of consolidation in the fiber business, Lenzing AG and Tencel, two companies that spent much of the mid-Nineties bickering over the rights to produce lyocell fiber, joined forces Tuesday.
Lenzing’s purchase of Tencel comes just days after Wichita, Kan.-based Koch Industries closed on its acquisition of DuPont’s Invista fibers unit. That business, which was merged with Koch’s KoSa polyester unit, is now an $8.4 billion behemoth, the largest company in the synthetic fibers industry.
While Lenzing is a fraction of the size of Invista, it will dominate the niche market for the cellulosic fiber lyocell, while no single company controls the fragmented polyester, spandex and nylon sectors. Those fibers are oil-based.
Thomas Fahnemann, chairman of Lenzing’s managing board, said Lenzing had bought Tencel from its current owner, the investment firm CVC Capital Partners, for an undisclosed price.
The deal resolves a decade of fractious relations between the companies. Tencel introduced its lyocell fiber to the market in 1992. When Lenzing followed with its version of the fiber in 1997, Tencel responded with legal salvos. Regulators eventually found both firms’ patents to be valid. But as early as 1999, management of Lenzing discovered it was having trouble making the business profitable and spoke of seeking an alliance with its rival.
CVC also owns Acordis, a firm that produces rayon, acetate, nylon and other chemical products. In October 2001, a proposed deal for CVC to purchase Lenzing was struck down by European Commission regulators because of anticompetitive concerns.
Fahnemann said this deal had not drawn regulatory scrutiny because of its smaller size. Referring to the 2001 attempt, he said, “That was really a wedding of elephants because it was the whole CVC group and the whole Lenzing group. This represents a small division of the whole Acordis group of companies.”
EC officials could not be reached for comment late Tuesday and a search of the commission’s Web site revealed no evidence of an investigation into the current deal.
For Lenzing, Tuesday’s acquisition triples its capacity to produce lyocell, a fiber made from wood pulp that is most commonly used in sportswear and career apparel such as suits, blazers, blouses and pants, where its smooth feel and wrinkle-resistance is valued. The combined entity will be the dominant player in the niche lyocell business, which is estimated at $180 million worldwide. Tencel had sales of $119.4 million, or 100 million euros, last year.
Tencel’s fibers have been used by brands including Levi’s, Diesel and Liz Claiborne.
Lenzing last year had sales of $742.4 million — reported as 621.9 million euros — with sales of lyocell and rayon fibers representing about 70 percent of its total volume. Net income from continuing operations was $72.2 million — 60.5 million euros — up 23.2 percent from the prior year.
The new business will have the capacity to produce about 120,000 tons of lyocell a year. Mike Proctor, chief executive of Tencel, said in a phone interview from Tencel’s U.K. headquarters that the estimated annual worldwide capacity for the fiber currently stands at about 140,000 tons — though he said he believes more plants are being constructed by rivals in Asia. He added that the company is also “competing very fiercely” with makers of other man-made fibers, such as Invista and Teijin in polyester, and Mitsubishi in rayon.
Fahnemann said in a phone interview from Austria, where Lenzing is based, that the key attraction was “the very strong brand Tencel, which we didn’t have before.”
Tencel operates plants in Mobile, Ala., and Grimsby, England, with total potential capacity of 80,000 tons of fiber a year. Lenzing’s lyocell plant at Heiligenkreuz, Austria, can produce about 40,000 tons of fiber a year. Executives at other fiber companies said actual sales of lyocell are likely a good deal lower than the plant’s capacities.
Tencel employs 350 people, while Lenzing employs 4,000 across its operations.
Fahnemann said Peter Landl, a Lenzing veteran, will serve as managing director of the Tencel unit of Lenzing. Proctor said he will be continuing with the new owners, but declined to reveal his new title because Tencel’s employees hadn’t yet been notified.
Last year, Lenzing sold its former Lowland, Tenn.-based U.S. rayon plant to members of management, who subsequently renamed the operation Liberty Fibers Corp. That firm primarily produces rayon for nonwoven fabrics, which are commonly used in industrial products such as hospital gowns.