Whirlpool makes offer for Maytag

Whirlpool makes offer for Maytag
 
Date July 18, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

Whirlpool Corp. has offered to buy rival appliance maker Maytag Corp. in a $2.3 billion deal that tops an earlier offer that Maytag had accepted from an investment group.

Whirlpool said late Sunday that its offer of $17 per share for Newton-based Maytag represents a 21 percent premium over the offer from Triton Acquisition Holding Co. Whirlpool would also assume Maytag‘s debt of $969 million.

Maytag‘s shares rose $1.56 or nearly 10 percent to $17,01 in early trading on the New York Stock Exchange today with more than 2 million shares traded.

Whirlpool planned a conference call late this morning to discuss the proposal with financial analysts. (Updates on the call will appear on the Newton Daily News’ Web site at http://www.newtondailynews.com)

Maytag confirmed today that it received an unsolicited bid from Whirlpool and that its board of directors would consider the proposal. However, Maytag said its board of directors continue to support of the existing Ripplewood-led transaction.

On May 19, Maytag agreed to be acquired by Triton, an entity organized by the New York investment company Ripplewood Holdings LLC, for $14 a share, in a deal valued at about $1.13 billion.

But on June 20, Maytag said it was considering a preliminary $1.28 billion bid from Bain Capital, Blackstone Group and China’s Haier America that valued Maytag at $16 per share.

Benton Harbor-based Whirlpool is proposing to acquire all 79 million outstanding shares of Maytag stock by providing shareholders $17 a share, of which at least 50 percent would be paid in cash and the balance in shares of Whirlpool common stock, which now trades around $70.

In a letter to Maytag CEO Ralph Hake dated Sunday, Whirlpool CEO Jeff Fettig said the Whirlpool offer is “superior” to Triton’s.

“It will provide the immediate opportunity for your shareholders to realize substantially greater value for their shares — a 21 percent premium over the Triton price,” Fettig wrote in the letter to Hake, who at one time was the chief financial officer for Whirlpool. “Moreover, your shareholders will have the opportunity to realize greater long-term value through the truly unique attributes of a Whirlpool-Maytag combination.”

Fettig said the competitive nature of the global appliance industry makes a merger of the companies beneficial to both.

“As you know, we operate in a highly competitive marketplace where trade customers and consumers have a large and growing choice of brands, products and suppliers, including a growing number of foreign appliance companies,”Fettig said. “Together, we can achieve substantial efficiencies that will deliver cost savings, increased innovation and better asset utilization. With these efficiencies, and Whirlpool’s track record of — and commitment to — investing in innovation, quality and customer service, our combined company will be well positioned to offer great value to consumers and to trade customers. And as part of Whirlpool, we can ensure that Maytag remains a trusted brand for years to come.”

Maytag filed its definitive proxy statement concerning the merger with Triton late Friday with plans to send it to shareholders of record on Wednesday. The proxy outlines the steps involved in the Ripplewood Holdings-led acquisition proposal and information concerning the merger agreement. A shareholder vote on the matter is set for Aug. 19.

Whirlpool said it is “ready to immediately review the due diligence information” Maytag has provided to Triton and is currently providing to the Haier America consortium, which includes Bain Capital and Blackstone Capital. The company said it hoped to have a firm offer for Maytag by Aug. 9.

Whirlpool has significant production operations in low-cost countries, such as Mexico, Poland and China, producing about 35 percent of its total product. More than 90 percent of Maytag production is in the United States.

In a letter to its workers today, Whirlpool CEO Fettig said the combination of the two company’s would be beneficial to both.

“The North American appliance industry is one of the most open and competitively dynamic markets in the world,” Fettig wrote. “The possible integration of the two businesses will help us meet the requirements of demanding trade customers and sophisticated consumers who have an ever increasing number of choices of brands and suppliers.

Maytag Corporation has a proud heritage. Its flagship brand is highly regarded. Given our best cost platform, by combining these resources — along with the efficiencies achieved by combining the Whirlpool and Maytag infrastructure — we believe we can benefit consumers, trade customers and our own mutual long-term success.”

During a conference call with analysts late this morning, Fettig would not expound about questions concerning Maytag‘s recent struggles but noted two areas in particular where a merger could be beneficial, efficiency and innovation.

“Clearly on the infrastructure standpoint there will be opportunities to integrate duplicate activities,” he said.

Some analysts believe anti-trust issues may arise out of the deal, although Maytag‘s sliding market share — about 15 percent after holding a 20 percent share a few years ago — may mitigate that concern. Whirlpool, the largest U.S. appliance manufacturer of such brands as KitchenAid and Roper, has about 35 percent market share in the U.S.

The Haier group is interested in acquiring a U.S. brand name to gain entry into the North American market. It has yet to make a definitive bid for Maytag.

Should Maytag end its agreement with Ripplewood, it would be required to pay the group a $40 million break-up fee.

The Associated Press contributed to this story.

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