Haier group makes $16-a-share offer for Maytag

Haier group makes $16-a-share offer for Maytag
 
Date June 21, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

Newton residents were left wondering about the future of Maytag‘s presence in town after China’s largest appliance maker, along with two U.S. equity firm giants, bumped the bid for Old Lonely.

Late Monday, Maytag released information that Haier America Trading, LLC; Bain Capital Partners LLC and Blackstone Capital Partners IV LP had sent a “preliminary, non-binding proposal” to acquire all outstanding shares for $16 cash. The new proposal also calls for debt financing provided by Merrill Lynch.

On May 19, Maytag accepted an offer from the New York City-based private equity firm Ripplewood for $1.13 billion, $14 a share, plus the assumption of $975 million in Maytag debt. Ripplewood was joined in the deal by Goldman Sachs Group Inc.’s GS Capital Partners and J. Rothschild Group.

In its announcement, Maytag said it plans to proceed with further due diligence on the new buyout offer but said “there can be no assurance that the preliminary non-binding proposal would result in a definitive agreement.” The process is expected to take six to eight weeks, the statement said.

“We continue to support the Ripplewood transaction; however, we also believe that it is incumbent on us to pursue this possibility of achieving a higher price for our stockholders,” said Maytag Board of Directors member Howard Clark in the statement filed with the SEC.

There was no comment from Ripplewood today.

Maytag‘s stock was up nearly 6 percent from Monday’s close, trading at $16.10 shortly before 10 a.m. today. Trading was heavy at more than 2.8 million shares.

The acquisition would allow Haier to compete with the largest appliance manufacturers. Adding Maytag, Amana, Hoover and Jenn Air brands into its product line would give the Chinese manufacturer credibility.

“Haier would get an instant credible product line,” David MacGregor, an analyst with Longbow Research told Reuters. “Longer term that could make them a competitive force to be reckoned with.”

The acquisition is part of a strategy by Chinese companies to enter the U.S. market.

“It is very difficult for Chinese appliance makers to establish a brand and sales network in the U.S.,” Sun Shengquan, a Shanghai-based analyst, told Bloomberg. “The shortcut is to buy an existing American brand. Quite a few Chinese companies may also follow this pattern.”

Haier would also be able to use the low-cost manufacturing conditions in China. According to the Asian Development Bank, Bloomberg reported, China’s unskilled labor rates are about 4 percent of the wages in the U.S.

Haier currently owns a factory in Camden, S.C., where it produced 500,000 refrigerators last year.

Maytag has faced difficult times of late. First quarter profits were down 80 percent ,which led Maytag CEO Ralph Hake to say prior to the buyout offers that “more aggressive steps” need to be taken to restructure its manufacturing operations and cut costs.

Previously, Maytag closed a refrigeration plant in Galesburg, Ill., and slashed 20 percent of its global workforce as part of its “One Company” reorganization.

Locally, Maytag has said the laundry production plant is not eligible for new product platforms and production may migrate from the plant to other locations unless costs can be reduced.

In addition to the Newton laundry facility, Maytag has targeted the Hoover production plant in North Canton, Ohio, for possible closure.

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