Whirlpool ups Maytag bid again

Whirlpool ups Maytag bid again
 
Date August 10, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

Whirlpool upped its bid for Maytag today, announcing it has submitted a new binding offer to acquire the Newton-based home appliance manufacturer for $21 per share.

The revised offer falls on the heels of Whirlpool’s $20 bid on Monday. The new offer brings the total value of the transaction to $2.7 billion, including approximately $977 million in Maytag debt, Whirlpool said in a brief announcement late this morning. All other terms of Whirlpool’s offer announced Monday remain in effect, the company said.

Shares of both Whirlpool and Maytag stock were suspended from trading on the New York Stock Exchange in advance of the news.

Whirlpool’s revised offer follows news that its competitor in the bidding war for Maytag may up its offer.

The New York Times and Chicago Tribune reported early today the consortium of investors led by private equity firm Ripplewood Holdings may be willing to increase its pending $14 offer for Maytag. Shareholders are set to vote on the $2.1 billion bid on Aug. 19.

Citing unnamed sources “close to the negotiations,” the papers said Ripplewood may offer $15.65 per share or $1.3 billion in a cash buyout of the struggling home appliance manufacturer. The newspapers said Ripplewood is hoping Maytag shareholders will support the less risky, but less lucrative, cash offer.

On Monday, Whirlpool submitted a bid of $20 a share in a cash and stock proposal. The bid contained a $120 million break-up fee should federal regulators deem the combined corporations control too much of the home appliance market violating anti-trust regulations. Whirlpool will also pay $40 million on behalf of Maytag to Ripplewood to cover the termination fee if the agreement is broken as well as $15 million for the retention of Maytag employees. The offer expires at 5 p.m. on Aug. 20, the day after the date set for Maytag shareholders to vote on the Ripplewood proposal.

The newspapers, citing home appliance industry analysts, said Whirlpool is agreeing to pay what is considered to be a premium price for Maytag to compensate Maytag shareholders for what may be a long wait for the sale to be completed and the possibility it may never come to pass. The bid presented to Maytag on Monday says Whirlpool has until the end of 2006 to complete the takeover.

Maytag‘s board of directors have yet to accept Whirlpool’s offer or provide any public comment. Calls to Maytag were not returned prior to press time.

Analysts have different views on how federal regulators might view a combined Whirlpool/Maytag operation.

Long-time home appliance industry analyst David MacGregor of Longbow Research in Independence, Ohio, says Maytag shareholders have little to worry about a Justice Department block of a Whirlpool takeover. He says the lack of opposition to the transaction from the top 20 trade customers and buying groups, including the top four retailers and top three buying groups which account for 90 percent of retail appliance sales, should give Whirlpool clear sailing through any review of the proposed merger.

Nicholas Heymann, an analyst from New York City-based Prudential Securities, however, questions Whirlpool’s “novel contention” that its very large share of Sears’ Kenmore private label appliance business should be exempted from consideration concerning anti-trust issues. In 2003, 18 percent or $2 billion of Whirlpool’s total revenue came from Whirlpool’s sales to Sears of washers, dryers and kitchen appliances.

“The company’s logic is that Sears holds essentially complete control over this portion of its business since Kenmore is the single largest brand in the North American market,” Heymann noted. “Yet the vast majority (excluding sourced products) of the production facilities to produce these Kenmore products supplied by Whirlpool to Sears are owned by Whirlpool.”

Including Whirlpool’s Kenmore capacity, Heymann notes, leaves a combined company controlling more than 70 percent of the North American market share for laundry products.

The merger would make Whirlpool the world’s largest home appliance manufacturer, surpassing Sweden-based Electrolux AB.

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