Maytag executives to garner millions in buyout

Maytag executives to garner millions in buyout
 
Date October 03, 2005
Section(s) Local News
 
By PETER HUSSMANN

Editor

Current and former Maytag executives would receive severance packages totalling more than $26 million with CEO Ralph Hake getting nearly $10 million alone, documents filed on Thursday with the Securities and Exchange Commission indicate.

The financial arrangements for Maytag‘s executive officers were included with a preliminary proxy statement filed by Whirlpool as part of its $2.7 billion cash, stock and debt assumption bid for the Newton-based company. The severance packages were negotiated by Maytag executives as part of their employment agreements with the company and are being honored by Whirlpool in the buyout bid.

In addition to the severance packages, the executives are eligible for advance vestment of stock options that would be exercisable upon completion of the merger. Those values would add millions to the total executive compensation as part of the buyout.

Under the terms of the severance agreements, current and past executive officers are eligible to receive two or three times the sum of their base salary, annual bonus and long-term bonus amounts. In addition, they would receive continued coverage under healthcare plans for two or three years, outplacement benefits and retirement payments equal to an additional two or three years of service credit under Maytag retirement plans.

The preliminary proxy statement also included a five-year low-case, base-case and high-case financial forecasts for Maytag. Included in the assumptions were the closing of Maytag‘s Newton, North Canton, Ohio; and Florence, S.C., production facilities. Maytag estimates it could save $140 million a year with those closures. However, the proxy statement says no decisions in regard to plant closures have been made.

It is not known whether Whirlpool agrees with Maytag‘s current strategy for plant utilization. In a filing today in connection with last week’s preliminary proxy, Whirlpool said Maytag continues to operate as a separate company until the merger is completed and that “it is too soon to discuss what may or may not happen if the merger is completed.”

Whirlpool, however, did say that it expects to generate approximately $300 to $400 million in pre-tax savings by the third year following completion of the merger. Achieving the savings would require one-time costs and capital investments in the $350 to $500 million range.

The SEC statement says Whirlpool expects to achieve efficiencies across its total operation, including product manufacturing and marketing, global procurement and research and development.

These cost savings, Whirlpool said, would allow the merged companies to compete more effectively against domestic and foreign competitors and offer a wider range of products to a larger consumer base.

Whirlpool said it expects the merger to be completed as early as the first quarter 2006. Maytag shareholders must approve the $21 cash and stock offer in order for the merger to proceed. No date has yet been set for that meeting, although it is expected to be held sometime later this year.

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