Maytag board recommends higher Whirlpool bid

Maytag board recommends higher Whirlpool bid
Date August 15, 2005
Section(s) Local News

AP Business Writer

Maytag Corp. agreed Friday to a half cash, half stock buyout from rival Whirlpool Corp., reversing an earlier recommendation to shareholders to accept a New York investment group’s all-cash deal.

Whirlpool, the nation’s leading appliance maker, increased its offer on Wednesday for the third time, proposing to buy Maytag for $1.79 billion, or $21 a share.

Including the assumption of $977 million of Maytag debt, the entire deal was valued at $2.7 billion.

It was a $1-per-share premium to the sweetened bid of $1.62 billion that Whirlpool had offered Monday.

Whirlpool’s deal is 50 percent cash and 50 percent Whirlpool stock. It also includes a $120 million “reverse breakup” fee, which would be paid to Maytag if regulators do not approve the combination.

Whirlpool’s offer represents a 50 percent premium to the initial bid of $14 per share, or about $1.13 billion, that Maytag received from investment group Triton Acquisition Holding Co. Maytag‘s board accepted the all-cash offer on May 19 and had recommended to shareholders approval of that deal at an Aug. 19 meeting.

On Friday, Maytag withdrew its recommendation of the Triton deal and postponed the shareholders meeting to Aug. 30.

If the merger agreement between Maytag and Triton is ended, the postponed special meeting will be canceled.

Maytag said that its board has determined that … it would be inconsistent with the Maytag board’s exercise of its fiduciary duty for the board to fail to withdraw its recommendation of the Triton $14 deal. The Maytag board now recommends a vote against the Triton deal,” the company said in a statement.

Benton Harbor, Mich.-based Whirlpool has also agreed to pay the $40 million Maytag would be required to pay the Triton group to walk away from that deal.

“We welcome the determination by the Maytag board of directors that ours is a superior proposal and look forward to the signing of a definitive agreement with Maytag,” said Jeff M. Fettig, Whirlpool’s CEO.

While the news of Maytag‘s support of a Whirlpool takeover left Newton residents wondering about the future of operations locally, the news was viewed in a more positive light in Michigan.

“The proposed purchase is a bright spot in an otherwise dark Michigan economy, which has lost thousands of manufacturing jobs,” the Detroit Free Press wrote in its account of the announcement.

“The deal should keep thousands of jobs in Michigan, as well as solidify Whirlpool’ls global presence by giving it brands such as Amana refrigerators, Jenn-Air stoves and the Maytag repairman advertising campaign.

“It’s unknown if any jobs would move to Michigan.

“‘We don’t think it will have any impact on our members in Michigan,” said Stephen Sleigh, director of resources for the International Association of Machinists and Aerospace Workers, which represents more than 200 Whirlpool employees in Benton Harbor.

“What we think this will mean for Maytag is that they will basically take the Maytag production and move it to Mexico and China.”

Whirlpool employs about 3,200 people at its Benton Harbor headquarters, including 250 at its manufacturing plant there.

Brokerage firm Morgan Keegan said today that Whirlpool’s proposed acquisition of rival Maytag could likely be completed early next year, as regulatory approval could take several months, Reuters reported.

In a research note, Morgan Keegan analyst Laura Champine said it would likely be the first quarter of 2006 before a Maytag-Whirlpool deal could be completed, given the sequence of events that could take place and likely timing of a shareholder vote.

“We believe regulatory clearance may take several months,” Champine said.

Ripplewood has five days to raise its offer or terminate its pact with Maytag. If Ripplewood makes a counter proposal, Maytag would then weigh whether it is better than the bid by Whirlpool, which has raised its offer three times since initially bidding $17 a share in mid-July.

A combination of Maytag, which makes Hoover vacuums and Jenn-Air and Amana appliances, and Whirlpool, whose brands include KitchenAid and Roper, would create the world’s biggest appliance maker.

Lowe’s, the second-largest U.S. retailer of appliances behind Sears Holdings Corp., said today it would be pleased to see a combination of U.S. appliance makers Whirlpool and Maytag, Reuters reported.

“We certainly think Whirlpool could probably bring some things to assist Maytag with their continued investment in the brand,” said Lowe’s Chairman Robert Niblock during an earnings conference call. “We would be pleased to see the merger.”

Lowe’s sells both Maytag and Whirlpool products.

Maryland-based Institutional Shareholder Services, a shareholder advisory service, concluded in an analysis released Friday that the Whirlpool offer benefits shareholders more.

Assuming a 50 percent chance of the Whirlpool deal getting regulatory approval and figuring in the reverse break up fee and other factors, ISS said Maytag shareholders get a better deal with Whirlpool.

“On that basis, we concluded that the nominal $7 spread when risk-adjusted more than compensates Maytag shareholders for the assumption of risk,” the analysis said.

ISS Merger and Acquisition Director Chris Young said any increased offer from Triton would result in a reevaluation of its recommendation.

“We would revisit all aspects of the deal including the provisions of the respective contracts,” he said.

Triton was not immediately available to comment.

Federal government regulators may have a concern that the top appliance manufacturer merging with the number three company may consolidate too much market share in one company, industry analysts have said.

Newton Daily News Editor Peter Hussmann contributed to this report.


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