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EXHIBIT 8.1
[LETTERHEAD OF KING & SPALDING]
404/572-4600 404/572-5100
August 19, 1998
Dan River Inc.
2291 Memorial Drive
Danville, Virginia 24541
The Bibb Company
100 Galleria Parkway, Suite 1750
Atlanta, Georgia 30339
Re: Federal Income Tax Consequences of Merger of The Bibb Company
with and into Dan River Inc.
Ladies and Gentlemen:
We have acted as tax counsel to Dan River Inc. ("Dan River") in
connection with the merger (the "Merger") of The Bibb Company, a Delaware
corporation ("Bibb"), with and into Dan River, pursuant to the Agreement and
Plan of Merger dated as of June 28, 1998, as amended by the First Amendment
dated as of August 14, 1998 (the "Merger Agreement") by and between Dan River
and Bibb. Sections 6.2(e) and 6.3(d) of the Merger Agreement require that, prior
to mailing the Joint Proxy Statement/Prospectus to the shareholders of Bibb, Dan
River and Bibb must obtain from King & Spalding an opinion regarding certain tax
consequences of the Merger, and must reconfirm such opinion prior to the closing
of the Merger. Accordingly, Dan River has requested us, in our capacity as tax
counsel to Dan River, to render such opinion and has requested that we authorize
Bibb to rely on such opinion.
We understand that our opinion will be referred to in the Joint Proxy
Statement/Prospectus that forms part of the Registration Statement on Form S-4
filed with the Securities and Exchange Commission in connection with the Merger.
We hereby consent to such use of our opinion and to Bibb's reliance on our
opinion.
All capitalized terms used herein without definition have the
respective meanings specified in the Merger Agreement. All references herein to
the Code are to the United States Internal Revenue Code of 1986, as amended.
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Dan River Inc.
The Bibb Company
August 19, 1998
Page 2
INFORMATION AND ASSUMPTIONS RELIED ON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including the Merger Agreement and the
Joint Proxy Statement/Prospectus. In our examination of documents, we have
assumed, with your consent, that all documents submitted to us as photocopies or
telecopies faithfully reproduce the originals thereof, that such originals are
authentic, that all such documents have been or will be duly executed to the
extent required, and that all statements set forth in such documents are
accurate. We also have obtained such additional information and representations
as we have deemed relevant and necessary, including representation letters from
Joseph L. Lanier, Jr., Chairman and Chief Executive Officer of Dan River, dated
as of August 19, 1998, and Charles R. Tutterow, Vice President and Chief
Financial Officer of Bibb, dated as of August 19, 1998. Our opinions assume that
the statements contained in such representation letters are true on the date
hereof and will be true at the time of the Merger.
In addition, in rendering our opinions herein, we have assumed that the
aggregate fair market value of the Dan River Class A Common Stock received in
the Merger by the Bibb stockholders (excluding any fractional shares of Dan
River Class A Common Stock for which a Bibb stockholder receives cash) will not
be less than 40% of the aggregate fair market value of all of the shares of Bibb
stock outstanding immediately prior to the Effective Time. For purposes of this
assumption, shares of Bibb exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of Dan River Class
A Common Stock will be treated as outstanding Bibb stock, and the aggregate fair
market value of the outstanding Bibb stock will be deemed to be equal to the sum
of the aggregate Merger Consideration paid in the Merger plus the aggregate cash
consideration (if any) paid to the Bibb stockholders immediately prior to the
Merger to redeem all outstanding Rights under the Rights Agreement dated
September 30, 1997 between Bibb and American Stock Transfer and Trust Company,
as Rights Agent, pursuant to Section 5.16 of the Merger Agreement.
OPINION
Based upon the foregoing, it is our opinion that:
(1) The Merger will constitute a "reorganization" within the meaning of
Section 368(a)(1) of the Code.
(2) The exchange in the Merger of Bibb Common Stock solely for Dan
River Class A Common Stock will not result in the recognition of gain or loss to
the Bibb stockholders with respect to such exchange.
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Dan River Inc.
The Bibb Company
August 19, 1998
Page 3
(3) A Bibb stockholder who exchanges his Bibb Common Stock for a
combination of Dan River Class A Common Stock and cash (other than cash received
in lieu of a fractional share interest in Dan River Class A Common Stock) will
realize gain equal to the excess of the amount of cash plus the fair market
value of the Dan River Class A Common Stock received by such stockholder over
the adjusted tax basis of his Bibb Common Stock, but such gain will be
recognized for federal income tax purposes only to the extent such gain does not
exceed the cash received. In general, this recognized gain will be taxable to
the Bibb stockholders as capital gain, although it is possible that such gain
will be taxable as dividend income to a particular Bibb stockholder if the cash
received by him does not result in a "meaningful reduction" in the percentage
ownership of Dan River Class A Common Stock that he otherwise would have
received (taking into account both his actual and constructive ownership of Dan
River Class A Common Stock under the constructive ownership rules of Section 318
of the Code). A Bibb stockholder who receives both Dan River Class A Common
Stock and cash in the Merger will not recognize any loss on the exchange.
(4) A Bibb stockholder who receives solely cash in exchange for his
Bibb Common Stock will, under the position taken by the IRS in published
rulings, be treated as having exchanged such stock for cash in a redemption of
his Bibb Common Stock subject to Section 302 of the Code, and the Bibb
stockholder generally will recognize capital gain or loss equal to the
difference between the amount of cash received and the stockholder's tax basis
in his Bibb Common Stock.
(5) A Bibb stockholder who receives cash in the Merger in lieu of a
fractional share interest in Dan River Class A Common Stock will be treated as
having exchanged such fractional share for cash in a redemption subject to
Section 302 of the Code, and the Bibb stockholder generally will recognize
capital gain or loss in such exchange equal to the difference between the cash
received and the portion of such stockholder's tax basis that is allocable to
the fractional share so exchanged.
(6) A Bibb stockholder who perfects his appraisal rights under Delaware
law and who receives payment in cash for the "fair value" of his Bibb Common
Stock will be treated as having exchanged such stock for cash in a redemption
subject to Section 302 of the Code, and the Bibb stockholder generally will
recognize capital gain or loss in such exchange equal to the difference between
the cash received and the tax basis of such stock.
(7) In the case of a Bibb stockholder who receives solely Dan River
Class A Common Stock in the Merger, the tax basis of the Dan River Class A
Common Stock received will be the same as the stockholder's tax basis in the
Bibb Common Stock surrendered in exchange therefor. In the case of a Bibb
stockholder who receives both Dan River Class A Common Stock and cash (other
than cash received in lieu of a fractional share interest in Dan River Class A
Common
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Dan River Inc.
The Bibb Company
August 19, 1998
Page 4
Stock), the tax basis of the Dan River Class A Common Stock received will
equal the stockholder's tax basis in the Bibb Common Stock exchanged therefor,
decreased by the amount of any cash received and increased by the amount of any
gain recognized in the exchange.
(8) The holding period of the Dan River Class A Common Stock received
by the Bibb stockholders in the Merger will include the holding period of the
Bibb Common Stock surrendered in exchange therefor, provided that the Bibb
Common Stock was held as a capital asset at the Effective Time.
(9) No gain or loss will be recognized by Dan River or Bibb as a result
of the Merger.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements and assumptions set out herein that we have assumed to be true on the
day hereof and at the time of the Merger. Our opinions cannot be relied upon if
any of the material facts contained in such documents or in any such additional
information is, or later becomes, or if any of the material statements and
assumptions set out herein is, or later becomes, inaccurate.
In particular, and without limiting the preceding sentence, our
opinions cannot be relied upon, and will not be reconfirmed prior to closing of
the Merger (thereby preventing the closing conditions in Section 6.2(e) and
6.3(d) of the Merger Agreement from being satisfied) if the assumption set forth
herein that the aggregate value of the Dan River Class A Common Stock issued in
the Merger will represent at least 40% of the aggregate consideration received
by the Bibb stockholders is not valid at the time such opinions are reconfirmed.
Finally, our opinions are limited to the tax matters specifically
covered thereby, and we have not been asked to address herein, nor have we
addressed herein, any other tax consequences of the Merger.
Very truly yours,
/s/ King & Spalding
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KING & SPALDING