Mohawk Chief Lorberbaum Emerges as Billionaire With Tiles
Jeffrey Lorberbaum, the chief executive officer of Mohawk Industries Inc. (MHK), the world’s largest maker of flooring products, is obsessed with details.
Strolling through one of his Calhoun, Georgia-based company’s five manufacturing facilities, the 58-year-old is quick to point out why a tile or flooring surface shouldn’t be in Mohawk’s product line, or how its operations could be more efficient. When trade magazines release surveys of how flooring companies are viewed by buyers, he has had executives call to find out specifics of the publication’s methodology.
“You won’t find many people who have anything nice to say about Jeffrey Lorberbaum,” said Bill Graves, who headed East Coast and Midwest U.S. and Canada sales for Mohawk until 2010. “He’s not a ‘rah-rah’ leader that connects with his lieutenants. That’s not his deal.”
Deals have helped transform what was his parents’ bathmat operation into a $5.7 billion housing products empire that includes wood, carpet and tile flooring operations, roofing and insulation businesses, and a do-it-yourself furniture line.
In December, the company made a $1.5 billion bid for ceramic tile-maker Marazzi Group SpA, based in Modena, Italy, a move that could extend the company’s market share in the U.S. to 23 percent, compared to 21 percent held by Berkshire Hathaway Inc. (BRK/A)’s Shaw Industries Group. The Marazzi purchase would also mark the third billion-dollar acquisition Lorberbaum has orchestrated.
Mohawk shares have rallied 12 percent on news of the merger, and have surged 77 percent since Lorberbaum took the reins of the company in 2001, closing at a 52-week record $94.53 yesterday in New York and making Lorberbaum a billionaire.
The run-up comes as the flooring industry is starting to recover from the housing crash that curtailed both new home construction and home renovations -- two sectors that accounted for 69 percent of the $18 billion U.S. flooring market in 2011, according to Floor Covering Weekly, a Uniondale, New York-based industry trade publication. In 2002, U.S. flooring was a $20 billion market.
Lorberbaum holds 9.6 million shares of Mohawk, or 14 percent of the company, valued at about $900 million. He owns the shares directly, through a trust and two entities he controls, Aladdin Partners and Dalton Partners, as well as through a one-third interest in another partnership, Helm Management.
He also has collected almost $200 million from stock sales and compensation since 1994, according to filings with the U.S. Securities and Exchange Commission. Based on an analysis of his insider transactions, taxes and market performance, Lorberbaum probably has almost $200 million in cash and other investable assets, giving him a net worth of $1.1 billion, according to the Bloomberg Billionaires Index. He has never appeared on any international wealth ranking.
Lorberbaum and Frank Boykin, the company’s chief financial officer and media contact, did not return calls seeking comment.
The billionaire has made growth by acquisition a central part of the company’s strategy. In 2002, he made Mohawk the world’s largest tile-maker by buying Dal-Tile, based in Dallas, Texas, for $1.8 billion. Three years later, he turned Mohawk into a force in the wood-floor market by paying $2.6 billion for Unilin, a Wielsbeke, Belgium-based maker of engineered wood and MDF board, a composite used in do-it-yourself furniture.
“Prior to those, the industry hadn’t seen billion-dollar acquisitions and he did two back-to-back,” said Kemp Parr, Publisher of Floor Focus Magazine, in a phone call from his Chattanooga, Tennessee office.
Between the billion-dollar acquisitions, Lorberbaum made smaller purchases, including Lees Carpet, which was part of a 2003 deal with billionaire Wilbur Ross to split Greensboro, North Carolina-based Burlington Industries. In 2007, Mohawk added hardwood floor plants from Columbia Forest Products, also based in Greensboro. Last October, it paid $150 million for Pergo AB, a laminate floor manufacturer in Trelleborg, Sweden.
“His growth has come through diversification,” said Parr. “Mohawk in 1998 was basically a U.S. carpet company second to Shaw Industries. Lorberbaum is high-energy, hands-on, passionate about the business and has a lot of good advisers.”
International markets should prove to be a growth area for a company that generated 82 percent of its sales in North American in 2011, according to data compiled by Bloomberg. In 2010, Mohawk bought a 35 percent minority stake in Foshan Xinghui Ceramics Co. Ltd., a ceramic tile-maker in Foshan, China, where the tile flooring market has been growing at an 8.8 percent annual rate the past five years, according to a Mohawk presentation to investors. It also has operations in Mexico, Russia and Australia, mostly established through other acquisitions.
“There is no real flooring market in the world that is on fire with growth,” he said. “They want to be in all the major flooring markets just because you have to be large in order to be profitable.”
Lorberbaum grew up in the carpet business, according to an interview he gave author Jason Jennings in his 2007 book, “Hit the Ground Running.” In 1957, Lorberbaum’s father, Alan, took $10,000 in savings from working at a relative’s textile company in Georgia to start Aladdin Mills, which made bathmats and rugs from extruded plastics. Lorberbaum, along with siblings Suzanne and Mark, grew up working on the factory floor during the summer.
“The company was the family, and the family was the company,” Lorberbaum is quoted as saying in Jennings’ book. “Every cent went back into the company to make it bigger, better, faster. Our only goal was to achieve as much growth as we could.”
After a break to earn his finance degree at the University of Denver in 1976, Lorberbaum returned to the family business, where his father told him he was OIT -- owner in training -- and performed various jobs throughout the company. Four years later, Lorberbaum spearheaded an effort for Aladdin to be one of the first in the industry to operate its own extruding machine, allowing it greater control over the cost and supply of its plastic feedstock.
Today, Mohawk uses about 20 percent of the recycled plastic in the U.S. as a raw material rather than buying solely from chemical companies.
In 1994, after opting against an initial public offering, the family sold Aladdin to Mohawk for $387 million in stock. The deal made the Lorberbaums Mohawk’s largest stockholder, with 42 percent of the shares. Lorberbaum was given the responsibility by then-CEO David L. Kolb with integrating Aladdin -- and later another half-dozen companies -- into Mohawk. He developed a reputation for a quick mind, thorough preparation and a demanding focus on execution.
Former Mohawk executive Graves said Lorberbaum has been generous in supporting a current executive at Mohawk who has terminal cancer, allowing the employee to continue working in the position full time.
“As tough as Lorberbaum is, he has a soft spot,” Graves said. “He really impressed me with the character he showed in that situation.”
The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in U.S. dollars.
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