CALHOUN, Ga. -- Mohawk Industries, Inc. has entered into a definitive agreement to acquire Unilin Holding NV, a manufacturer and marketer of laminate flooring.

Unilin, based in Belgium, markets laminate products  under the name Quick-Step.

The transaction is valued at approximately 2.2 billion euros  (US$2.6 billion), including net cash balances of 28 million euros  (US$33 million). Unilin has annual sales of approximately 837 million euros (US$1 billion).

 Commenting on the Unilin purchase, Jeffrey S. Lorberbaum, chairman and chief executive officer of Mohawk,  said, "Laminate flooring has demonstrated exceptional growth and market share gains in Europe over the last decade.  The 2004 U.S. market of $1.2 billion, which grew 24% from 2003, is currently anticipated to grow in excess of 15% per annum."

 Unilin is a leader in high-end laminate with strong positions in both the U.S. and Europe, said Lorberbaum. "The market position and high margins of Unilin reflect the superior performance of the current operating management team who has developed one of the best recognized brands in Quick-Step," said Lorberbaum.

"Unilin brings to Mohawk a proven knowledge of the European flooring market and unique distribution capabilities through high-end specialty retailers. In addition, Unilin has a growing share of the U.S. market and is presently completing the expansion of a new flooring plant. Unilin is the only vertically integrated laminate producer in the U.S. with a modern HDF board plant in North Carolina. Our plan is to continue supporting the Quick-Step brand through the existing distribution structure and customer base. In addition, new brands and products will be introduced to meet the needs of the market," according to Lorberbaum.

Mohawk will contribute to Unilin's success through its U.S. distribution network and the capacity to accelerate market share in the United States, according to Lorberbaum.
 

" Unilin also brings an insulated roofing and other wood-based panels business with high value applications. Unilin controls and continues to develop significant patents for laminate manufacturing which generate royalty streams," he added.

Lorberbaum said present management will continue to operate Unilin and will also make a significant investment in Mohawk. "We intend to nominate Frans De Cock, chairman of Unilin's management board, to the board of Mohawk," he said.

" Unilin's legacy of innovation brings to Mohawk many of the key technologies that have driven consumer demand for laminate flooring over the past decade, including the company's technologies for direct pressure laminate, patented Uniclic glueless installation systems, beveled edge, scraped surface look, and many others. We are impressed by Mohawk's operational and financial successes and are excited to be part of the Mohawk family," said DeCock.

Looking ahead, Lorbebaum said the transaction is expected to be slightly accretive before synergies in 2006. "Although we will not realize significant synergies in the first year, we believe that there exist many opportunities to improve the combined business including accelerating the market penetration of Unilin's products, leveraging Mohawk's brands and distribution,  leveraging Unilin's U.S. production capability and  providing an avenue of growth for Mohawk in Europe. "

The acquisition of Unilin represents Mohawk's  second major step in diversifying into a total flooring company,Lorberbaum noted.  "The acquisition of Dal-Tile in 2002 made Mohawk the largest provider of ceramic in the U.S. Since then, we have been able to grow market share, improve costs, and expand Dal-Tile sales at a 15.4% CAGR since 2001."

Lorberbaum noted that Mohawk has expanded Dal-Tile's customer base, broadened the product line, improved the merchandising and enhanced the service levels.

"The combination of Mohawk, Unilin and Dal-Tile will continue to strengthen our position in the market and lead to a stronger company," said Lorberbaum.

The acquisition, which was unanimously approved by Mohawk's board of directors and Unilin's shareholders, is expected to close in the fourth quarter of 2005 and is subject to regulatory approvals and other closing conditions. Lehman Brothers acted as exclusive financial advisor to Mohawk and has provided a fairness opinion regarding the transaction.

Mohawk offers  tufted and woven broadloom carpet, ceramic tile, laminate, wood, stone, vinyl, rugs and other home products. In the rug category, Mohawk is the parent company of Mohawk Home, Karastan and Mohawk Select.