NEW YORK - Billionaire investor Carl C. Icahn agreed yesterday to buy WestPoint Stevens Inc., the financially ailing maker of Martha Stewart sheets and towels, for $703 million, winning a five-month bidding contest against financier Wilbur L. Ross.
Icahn's American Real Estate Holding Ltd. outbid Ross and a group of creditors in an auction, WestPoint Stevens said in papers filed with the U.S. Bankruptcy Court in New York yesterday.
Lawyers for Ross and the creditors challenged WestPoint's accord with Icahn and the terms of the auction in bankruptcy court, where the textile firm is undergoing reorganization.
U.S. Bankruptcy Judge Robert D. Drain agreed to hear further arguments from them Monday.
WestPoint Stevens, after cutting its work force by a fifth to compete with overseas textile makers, attracted bids for the value of its major retail brands such as Martex.
The nearly 200-year-old textile maker owes creditors $2 billion after filing for bankruptcy in 2003 and may thrive after a restructuring, said retail analyst Richard D. Hastings.
Icahn "is looking at the cash flow from the WestPoint Stevens brands," said Hastings, a retail analyst at Bernard Sands LLC in New York, which advises textile makers and other suppliers. "They have very strong market positions that will continue for many years to come."
Ross and the creditors agreed to buy the assets for $632 million in February. WestPoint Stevens held an auction yesterday in an effort to get a better deal.
Earlier this year, WestPoint Stevens closed four factories and two warehouses in South Carolina, North Carolina, Indiana and Virginia and fired 2,465 workers.
The company said in January that it would buy more from low-wage foreign textile producers. Textile makers including Fruit of the Loom Inc. and Pillowtex Corp. also have filed for bankruptcy after losing sales to foreign imports.
Calls to Icahn spokeswoman Susan Gordon and American Real Estate Vice President Martin Hirsch weren't returned.