Regulatory review continues despite shareholders’ OK

Regulatory review continues despite shareholders’ OK
Date December 22, 2005
Section(s) Local News

AP Business Writer

DES MOINES — Even though Maytag Corp. shareholders have approved the proposed merger with Whirlpool Corp., it is far from a done deal, as federal regulators have a big say in whether deal goes through, analysts said.

Whirlpool has offered to buy Maytag for $1.79 billion, or $21 a share and will assume Maytag‘s debt of $977 million.

Industry analysts differ in their opinions on whether the antitrust division of the U.S. Department of Justice will permit the nation’s largest and third-largest appliances manufacturers to join forces.

Many analysts believe that a Whirlpool-Maytag combination gives the new company more than 70 percent of the North American washer and dryer market. Normally, such a concentration would prompt regulators to require the companies to sell off parts of the business to more evenly balance competition.

“I can assure you that this merger, the numbers in it, would suggest reasons for grave concern,” said Stephen Calkins, a law professor at Wayne State University and a former Federal Trade Commission attorney.

However, many other factors are considered in complex mergers, he said. Among them are the presence of foreign manufacturers and the likelihood that they can effectively compete.

Regulators also may consider efficiencies that would be gained by the merger and whether one of the competitors is seeing a declining market share going into the merger.

Industry analyst David MacGregor, of Ohio-based Longbow Research, said he believes the government will consider the merger in the broader context of a global market, which has significant competition from more than half a dozen companies.

“When we look at the Justice Department review, I think the basis upon which they consider this transaction is two American companies competing within a global marketplace and one of them’s not doing so well and that they decide proactively to allow this,” he said.

Analysts said Maytag has continued to weaken since it lost floor space for Maytag brand appliances at Best Buy Co. retail stores in January.

A Best Buy spokesman said customers turned to other brands focusing more on style and innovation, including South Korea-based LG and Samsung Electronics Co.

LG and Samsung, recent entrants into the U.S. home appliance market, already have captured as much as 4 percent of the market.

The government is concerned about competition because when one company controls too large a share, it can manipulate prices and leverage its power with retailers to reduce floor space for competitors. Too little competition could slow product innovation.

Department of Justice attorneys working on the case could ask for an extension of time if more fact-finding is needed beyond Feb. 27. Maytag and Whirlpool have agreed not to close the deal before that date.

The attorneys then will make a recommendation to Assistant Attorney General Tom Barnett. The government will either approve the deal or require changes before it could be approved.

“A consent order can involve limited or sometimes quite massive divestitures of plants or brands or physical assets,” Calkins said. “It’s simply a process of the government indicating areas of concern and the parties deciding which ones they can accommodate.”

If an agreement can’t be reached, the companies could agree to enter into negotiations with the government or file a lawsuit.


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