NEW YORK (Reuters) - Plains Cotton Cooperative Association (PCCA), one of the largest cotton merchants in the United States, has sold its denim mills that supply big-name brands like Wrangler, the latest in a recent wave of deals transforming the U.S. textile industry.
New York-based private equity firm Monomoy Capital Partners and investment group Kingsmoor LLC have partnered to buy the cotton marketing firm’s textile operations in Littlefield, Texas, and in Guatemala City, according to a statement posted on PCCA’s website on Wednesday.
Terms were not disclosed.
The new investors expect to capitalize on the migration of denim and apparel manufacturing to the Americas from Asia, Robert Fowler, a partner at Kingsmoor and chief executive officer of newly formed American Textile Holdings LLC (AmTex), said in a separate statement.
The Littlefield mill converts raw cotton into denim fabric, which is then cut and sewn into finished jeans at the Guatemala City site. Customers include VF Corp (VFC.N), which makes Wrangler and Lee jeans.
AmTex plans to boost capacity at both plants which are operating at about 50 percent, Stephen Presser, partner at Monomoy told Reuters.
The textile industry in the Americas has been undergoing a boom as foreign companies are breaking ground on yarn mills, as they seek lower-cost, reliable energy, and proximity to raw materials.
“We have this peculiar cotton supply chain where it’s grown here and sent to China or India. For a financial investor, there’s something intriguing about narrowing the supply chain,” said Presser.
Retailers are also under consumer and activist pressure to source from producers with safe working conditions after a series of deadly accidents in factories in Bangladesh.
In December 2013, a private equity firm bought a majority stake in Frontier Spinning Mill Holding Corp, the No. 2 U.S. spinner, looking to take advantage of low energy costs and booming yarn exports to China.
For PCCA, which sells cotton from one of the country’s largest grower co-operatives, the move means “refocusing on ... core businesses of cotton marketing, warehousing and software service,” President and CEO Wally Darneille said in the statement.
A spokesman for PCCA declined to comment further.
Reporting by Chris Prentice; Editing by Leslie Adler, Bernard Orr