The planned merger between carpet makers Feltex and Godfrey Hirst has been called off, leaving Feltex to go it alone with its plans to revive the company's fortunes.
The decision was confirmed by both companies last night following their meeting in Melbourne on Monday to continue discussions on Australia-based GodfreyHirst's proposal to merge their operations.
It is understood the Feltex board felt the offer was more like a takeover by largest shareholder Godfrey Hirst than a merger.
Feltex chairman Tim Saunders said in a statement the board could not support Hirst's proposal "in its present form", but was open to alternative proposals to combine the businesses.
Saunders said that in the meantime the company would push on with a wide-ranging review of its operations to identify cost savings that last week resulted in 235 jobs being axed and a Melbourne yarn plant closed - a move expected to save the company $15 million a year before tax.
More decisions on its restructuring are expected next month.
Godfrey Hirst finance director Jim Walsh said he was disappointed an agreement could not be reached, and believed the proposal it had put had been an "attractive one for Feltex shareholders".
"Clearly they formed a different view, that it was either insufficient or that they could do better on their own, and we weren't prepared to increase our offer."
However, the two rivals had agreed to explore opportunities to share resources or merge parts of businesses that held benefits for both companies, said Walsh.
"There's been nothing specific discussed but we've agreed that if there are opportunities that make sense, we'd look at them."
Asked if this could lead to plant closures for either company, he said no options had been ruled in or out.
Saunders was unavailable to comment further last night.
The decision ends an episode that started in June when Godfrey Hirst snared a 5.83 per cent Feltex stake to become its biggest shareholder.
This came soon after Feltex's second profit downgrade in a year, and its share price had plunged from its issue of $1.70 in June last year to a low of 39c a year later.
