Maytag merger plan has $40 million breakup fee

Maytag merger plan has $40 million breakup fee
 
Date May 24, 2005
Section(s) Local News
Brief  
 
WASHINGTON (Dow Jones/AP) — Maytag Corp. said Monday it could owe $40 million to an investor group led by Ripplewood Holdings LLC if its proposed deal to be taken private by the group falls apart.

Last week, Ripplewood said it agreed to acquire Maytag, the Newton, Iowa-based maker of appliances, for $14 a share and to assume $975 million in debt.

Maytag said in a regulatory filing that unless there’s a breach of the merger agreement, either party can walk away from the deal if it isn’t completed by Dec. 15.

The investor group includes J. Rothschild Group, RHJ International and GS Capital Partners.

Ripplewood is expected to accelerate foreign production of Maytag‘s well-known brands such as Maytag, Hoover, Jenn-Air and Amana.

Shares of Maytag rose 99 cents, or 6.9 percent, to close Monday at $15.39 on the New York Stock Exchange.

The above-offer stock price implies that some investors believe another bidder will emerge or that Ripplewood will have to sweeten its price to win shareholder approval of the deal.

Maytag disclosed the bid only after its board had accepted it.

A few large stakeholders said they intend to vote against Ripplewood’s offer, should it prove to be the only one on the table.

“We think something with a ‘2’ in front of it certainly is justified by our math,” said John Goetz, co-chief investment officer at Pzena Investment Management LLC, a New York investment adviser that at last report owned more than 1.1 million Maytag shares.

Goetz said the firm would hold out for a higher price.

Ironwood Capital Management LLC president Warren Isabelle, whose Boston company owns more than 356,000 Maytag shares, said the would-be buyout group is “definitely low-balling the bid,” adding, “at $14 I would vote against it.”

Isabelle said that while the company has “a lot of warts,” the Maytag name is a valuable brand.

The Securities and Exchange Commission filing also includes a provision for the establishment of a $3 million “retention pool for th purposes of retaining the services of employees who are key employees.”

The retention bonuses would be overseen by Maytag CEO Ralph Hake. He will determine, with approval of the board and Ripplewood, employees eligible to receive retention awards which would be payable at the time the merger is complete. No primary company executive is allowed to receive retention bonuses.

Daily News Editor Peter Hussmann contributed to this report.

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