July 18, 2005
Whirlpool ups bid for Maytag
By Karen Jacobs
ATLANTA (Reuters) - U.S. appliance maker Whirlpool Corp.
on Sunday proposed to buy smaller rival Maytag Corp. for more
than $1.3 billion, topping an existing buyout offer for the
maker of Hoover vacuums and possibly sparking a bidding war.
The Whirlpool offer of $17 a share beats a $14-a-share bid
by an investor group led by New York private equity firm
Ripplewood Holdings and represents a 10 percent premium over
Maytag's closing stock price of $15.45 on Friday.
The proposed combination would marry two U.S. appliance
icons and their well-known brands. Whirlpool makes Roper and
KitchenAid, while Maytag's brands include Jenn-Air, Amana, Jade
Whirlpool's move could ignite a bidding war, as a group
including Chinese appliance maker Haier has expressed interest
in buying Maytag for $16 a share but has not made a formal bid.
In a prepared statement for Reuters, Haier reiterated it
"is very interested in the matter of acquiring Maytag, but up
until now has not made any decision regarding the matter of an
acquisition." It added: "At the same time, Haier will not
comment on the actions of other companies."
Ripplewood, Maytag and Haier's partners -- U.S. investment
firms Bain Capital Partners and Blackstone Group -- were not
immediately available for comment.
Whirlpool, which also reaffirmed its 2005 earnings
forecast, valued its offer at $2.3 billion, including the
assumption of $969 million in debt. The company has scheduled a
conference call to discuss the bid at 11:00 a.m. EDT (1500 GMT)
later on Monday.
The Whirlpool offer values Maytag at almost 35 times
expected 2005 earnings of 49 cents a share. That's almost three
times Whirlpool's forward PE of 12.
In a July 17 open letter to Maytag, Whirlpool said it would
pay at least 50 percent in cash and the balance in shares. A
combined Whirlpool-Maytag could achieve "substantial
efficiencies" to drive cost savings, use of assets and
innovation in an increasingly competitive industry, it said.
Maytag's profitability has declined amid a slump at its
Hoover unit, higher raw materials prices and competition from
Asian rivals with lower costs.
This year, Maytag hit a low when retailer Best Buy stopped
selling its washers and refrigerators. Home Depot, which
accounted for 10 percent of Maytag's sales last year,
introduced LG Electronics appliances, increasing the
competition Maytag faces on that sales floor.
The 112-year-old Maytag, which promoted its washing
machines in U.S. ads featuring a lonely repairman, had a loss
of $9 million last year as sales slipped 1.5 percent to $4.7
billion. Whirlpool, founded in 1911, earned $406 million last
year on sales of $13.2 billion.
The rival bid could be welcome news to some Maytag
shareholders who have said Ripplewood's offer was too low.
Maytag said in a recent federal filing that it faced
stockholder lawsuits over the Ripplewood deal's value.
Maytag has set an Aug. 19 shareholder vote in its hometown
of Newton, Iowa, to vote on the Ripplewood deal. Ripplewood's
group, Triton Acquisition Holding, includes Goldman Sach's GS
Capital Partners and the J. Rothschild Group.
Whirlpool's letter to Maytag said that it was ready to
"immediately review the due diligence information" that Maytag
has given to Triton and is providing to the Haier group.
In recent weeks, Triton put pressure on Maytag to speed up
discussions with the Haier group. Triton has said the delayed
process could result in it walking away from its deal and
claiming a $40 million breakup fee. Maytag expects to finish
due diligence with Haier on July 22, it said in an SEC filing.
The pact with Maytag has a clause giving Triton a "last
look" at a rival offer, allowing it to match the offer if its
Whirlpool, based in Benton Harbor, Michigan, backed its
previous forecast for full-year 2005 earnings in the range of
$5.90 to $6.10 a share. Analysts currently expect $5.89 a
share, according to Reuters Estimates.
Whirlpool's stock, which eased 86 cents to $69.99 on
Friday, started the year at $71, slid to around $61 by mid-May,
and then hit a high of $74.03 on June 21. Maytag traded in the
$9 range shortly before the Ripplewood bid.
(Additional reporting by Michael Flaherty in New York)