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Justice Department Clears Whirlpool-Maytag Deal

Posted on: Wednesday, 29 March 2006, 21:00 CST

DETROIT _ The U.S. Justice Department approved Whirlpool Corp.'s purchase of Maytag Corp. for $1.68 billion in cash and stock after determining that competition wouldn't be substantially reduced.

Benton Harbor, Mich.-based Whirlpool finally got the green light Wednesday after weeks of speculation that federal regulators might file a lawsuit to stop the deal on antitrust grounds. The purchase went through only after Justice Department officials took an "exhaustive look" at concerns about the deal's market-share implications.

"The proposed transaction is not likely to reduce competition substantially," Thomas O. Barnett, head of the department's antitrust division, said in a statement. "Large cost savings and other efficiencies that Whirlpool appears likely to achieve indicate that this transaction is not likely to harm consumer welfare."

News of the deal was music to the ears of shareholders.

Shares of Whirlpool shot up $6.38 or 7 percent to close at $95.95 on the New York Stock Exchange. Maytag saw its stock jump $4.73 or nearly 28 percent to $21.81.

Whirlpool has $14 billion in revenue and 68,000 employees worldwide. Last year, Maytag recorded sales of $4.7 billion. The company has 18,000 employees.

Justice Department officials determined that combining two strong rivals could lead to efficiency improvements and wouldn't hurt consumers. They added that the newly formed company isn't likely to give it "market power in the sale" of products.

The deal puts two of the top three household appliance makers under the same corporate roof. Whirlpool makes washers, dryers and refrigerators under the brands KitchenAid and Consul, among others. Newton, Iowa-based Maytag's brands include Amana and Jenn-Air.

"The Maytag portfolio of brands, when combined with Whirlpool, will enhance our ability to succeed in reaching a broader set of customers, which can benefit from our innovation and efficiencies," Whirlpool Chairman and CEO Jeff Fettig said.

The controversial combination comes after a spate of offers and counteroffers last summer and the Justice Department's request in February to postpone completion of the deal.

Whirlpool won its tug-of-war with Ripplewood Holdings LLC, a New York-based private equity firm, for the right to buy Maytag last August. Maytag shareholders accepted a $ 21-a-share offer.

Critics of the deal charged that combining the Nos. 1 and 3 appliance manufacturers would create a de facto monopoly by giving Whirlpool a nearly 50 percent share of the U.S. market, according to Appliance Magazine, an Oak Brook, Ill.-based industry publication. Officials at Whirlpool disagreed, saying the combined company would have a 30 percent market share.

In the last month, some industry analysts and Iowa-based politicians urged the Justice Department to reject the deal on grounds that it would encourage "unfair monopoly-like behavior in the appliance industry."

"I'm not sure that a stronger case is ever going to come along," said Ray Murphy, an antitrust attorney and founder of a Richmond, Va.-based research firm specializing in mergers and acquisitions. "Deals that would have been rejected a while ago are now very doable. I guess this suggests that there aren't that many deals that can't be done."

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Source: Detroit Free Press

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