July 18, 2005
Maytag to consider Whirlpool takeover offer
By Karen Jacobs
ATLANTA (Reuters) - Appliance maker Maytag Corp. on Monday
said it would weigh a higher, unsolicited takeover offer from
its larger rival Whirlpool Corp.
agreed to be acquired by a group led by Ripplewood Holdings
$2.08, to $17.53 in afternoon New York Stock Exchange trading,
while Whirlpool gained nearly 5 percent.
Whirlpool on Sunday offered to buy Maytag, the maker of
Hoover vacuum cleaners and Jenn-Air and Amana appliances, for
$1.3 billion, topping the $1.125 billion pact with private
equity firm Ripplewood and possibly sparking a bidding war.
Jeff Fettig, Whirlpool's chairman, said the deal "makes so
much sense" for shareholders, retailers and consumers because
Whirlpool can use its manufacturing and distribution to lower
costs and revitalize Maytag's venerable brands.
"We are extremely excited," Fettig said during a conference
Whirlpool is the third potential suitor for Maytag, which in
recent weeks has held talks with a consortium led by Chinese
appliance maker Haier that has proposed offering $16 a share,
but has not made a formal bid.
Though lawyers and analysts said a merger of the two U.S.
companies would raise weighty antitrust issues, Whirlpool said
it was confident the deal would receive regulatory clearance,
and would not diminish competition in any product category.
"The combination would improve competitiveness in our
industry by setting higher standards for innovation, efficiency
and customer service," Fettig said.
Washington, D.C., antitrust lawyer Robert Doyle said the
deal could provoke opposition because of the sizable share
Whirlpool would gain. For instance, Prudential Equity estimates
the combined companies would have market share of 48 percent in
major appliances, and 81 percent in the gas dryer category.
"On its face it raises serious antitrust concerns," said
Doyle, of the law firm Sheppard Mullin Richter & Hampton LLP.
Whirlpool could try to make a case that antitrust concerns
would be outweighed by efficiency gains, but U.S. authorities
might not accept that logic if they conclude those same
efficiencies would be available to other buyers, Doyle said.
Maytag said its board still backs the Ripplewood deal,
which will come up for a shareholder vote on Aug. 19.
But Whirlpool, which sells products in more than 170
countries and has nearly 50 manufacturing and technology
research centers worldwide, could be a preferred suitor given
shareholder criticism of the Ripplewood bid as too low and
growing sentiment against foreign attempts to buy U.S.
"Whirlpool can add a tremendous amount of value to Maytag,"
said John Goetz, co-chief investment officer of Pzena
Investment Management in New York, which owns 1 million Maytag
shares and 6 million Whirlpool shares. "Ripplewood and Haier
don't have as many weapons in their arsenal."
Goetz said the offering price for Maytag could go higher
before a deal is done. "We definitely think it's worth pushing
the antitrust issue because this is a global business."
Longbow Research analyst David MacGregor said in a research
note that Whirlpool's relationship with unions that work with
Maytag gives it an edge over other bidders. He also noted the
deal could give Whirlpool entry into Home Depot's U.S. stores.
Other analysts said Whirlpool could be bidding for Maytag
to prevent a stronger international rival from emerging. Haier,
which sells low-end products in the United States, is China's
largest appliance maker.
Prudential Equity's Nicholas Heymann said in a research
note that the peak of the housing market may not be an ideal
time for Whirlpool to buy Maytag. He said an acquisition could
entail restructuring expenses to close higher-cost Maytag
plants, adding millions to the net price.
Maytag has seen profits decline amid a prolonged slump at
its Hoover unit, higher raw materials prices and competition
from foreign rivals with lower costs such as Asia's LG
The Newton, Iowa, company was hurt earlier this year when
retailer Best Buy
and refrigerators. Home Depot
LG products, cutting into Maytag's share on that sales floor.
Whirlpool, based in Benton Harbor, Michigan, said it would
pay at least 50 percent in cash and the rest in stock, and
hopes to negotiate a definitive agreement soon.
Whirlpool's shares were up $3.37, or 4.8 percent, at
$73.36, close to their year's high of $74.03.
(Additional reporting by Jessica Hall and Peter Kaplan)