State of the art. That describes Zagis USA’s goal for the launch of its U.S. mills. Zagis USA is a company formed by North Carolina textile executives and Group ZAGA, one of Mexico’s most successful commercial and industrial conglomerates. Zagis USA produces about 35 million pounds of cotton annually. When the company set its sights on opening new mills in the U.S., Zagis considered several suitable locations. Specifically, the mills needed access to raw material and proximity to ports and freight lanes. Louisiana boasted an abundant supply of cotton, but could it meet the company’s other needs?
The Challenge
Zagis envisioned a 130,000-square-foot facility with the world’s most advanced cotton-spinning technology. The mill site would represent the first major U.S. business entity operated by ZAGA Group, and Zagis needed a location that met all supply and shipping needs.
The company favored Louisiana, Mississippi and Texas because of the cotton supply and Gulf Coast ports in each state. Because of the project complexity, Zagis expected challenges and needed strong state and local government partners. On every front, Zagis saw Louisiana as a promising choice.
“Louisiana, for a long time, has had all of this amazing potential. If you look at where it sits, if you look at where the highways run, if you look at where the Gulf is, on paper, it is tough to beat. It is different from the rest of the country,” said Dan Feibus, president and CEO of Zagis.
The Solution
For two years, Louisiana Economic Development worked with Zagis, and the partnership culminated in an incentive package demonstrating Louisiana as the ideal business environment.
“A great deal is going on in this state. There are a lot of smart people, growing companies, support for growing companies and good people wanting to work. With the right people, capital structure and location, it cumulatively adds up to a trajectory for success,” Feibus said.
Zagis received a $2.4 million performance-based loan through the state’s Economic Development Loan Program. The State Bond Commission approved $10 million in Jefferson Davis Parish industrial bonds. The company also qualified for the state’s Industrial Tax Exemption and Quality Jobs incentives.
In addition to competitive business incentives, Louisiana officials demonstrated, according to Feibus, “first-class assistance” with helping Zagis find the right bond counsel, local attorneys, and banking and accounting support that set the state apart from competitors.
“Zagis chose Louisiana because of its location relative to raw material, its infrastructure – interstate, rail, ports – and the strong entrepreneurial support from Louisiana’s departments of economic development and agriculture,” said Feibus.
When confronted with permitting challenges, Zagis scaled down the mill slightly to 128,000 square feet. LED demonstrated flexibility as a business partner and quickly assisted Zagis by modifying the incentive package to help overcome the setback.
According to Feibus, “Louisiana is willing to sweat the details, understand what your business is about and work with your company to tailor the right solution.”
The Results
Through its incentives, professionalism and determination to be an effective partner, Louisiana demonstrated to Zagis why the state offered the ideal location. In September 2008, Zagis committed to building the first of two mills in Lacassine, La. The company agreed to invest $75 million in a two-phase cotton-spinning project and to create 160 new jobs with average annual wages of $31,000, plus benefits, by 2012. LED estimates completion of the mills will create 645 more indirect jobs. The first mill opened in December 2009. Currently, there are 74 new direct jobs.
The second mill will be among the world’s most advanced spinning plants, using technology, affordable electricity and optimal logistics to make Zagis globally competitive.
“Plant 1 is an air-conditioned plant that is going to maintain humidity within a 2 percent range constantly. It will have over 250 turns of cubic feet per minute,” Feibus said. “These are sophisticated pieces of machinery with rotors that turn at 150 thousand revolutions per minute mounted on magnetic bearings.”
Locating to Louisiana ensured Zagis would have one of the lowest yarn production costs in the world. Access to raw material, proximity to ports, strategic freight lanes, low-interest costs, state incentives, and reliable and affordable power were key. As an export-driven company, Zagis is changing the face of the cotton industry in Louisiana. Instead of shipping unprocessed raw material, the company will ship value-added Louisiana agricultural product.
“This represents a significant shift for the cotton industry, particularly here in Louisiana,” said LED Secretary Stephen Moret. “Historically, most of Louisiana’s cotton has been shipped out of state in raw, unprocessed form, headed for export markets.”
“This investment by Zagis is huge news for Lacassine and all of Louisiana,” said Gov. Bobby Jindal. “With this new facility, we are keeping more of our homegrown cotton in our state and turning it into valuable textile fibers to create good jobs for our people right here at home. Indeed, instead of Louisiana exporting our raw foods so others can profit, we are now creating value-added jobs here and helping our farmers at the same time.”
The investment by Zagis represents a substantial opportunity for Louisiana to convert native cotton into new Louisiana jobs. Recent business development projects won by Louisiana are resulting in significant job growth and billions of dollars in capital investment all across the state. These wins are fueling hundreds of millions of dollars in new sales for Louisiana small businesses and continuing the economic growth of the state. Visit the LED News webpage for updates about the new Louisiana.
