Harkin, Boswell aim to block Whirlpool acquisition

Harkin, Boswell aim to block Whirlpool acquisition
 
Date January 13, 2006
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

The two Democratic members of the Iowa congressional delegation are asking that the Justice Department block Whirlpool Corp.’s planned purchase of Maytag.

In a letter sent Thursday to Thomas Barnett, assistant attorney general for antitrust within the Justice Department, Sen. Tom Harkin and Rep. Leonard Boswell said they were “very troubled” by the merger plan and the unfair market advantage the combined companies would have within the appliance industry.

“By letting Whirlpool’s acquisition move forward, the Justice Department would be encouraging unfair monopoly-like behavior in the appliance industry,” Harkin said in a release. “This acquisition is a loss for Iowans, consumers nationwide and Whirlpool’s competitors. It creates an unfair advantage, and I hope that it will be prevented.”

The Justice Department is in the process of reviewing Whirlpool’s $1.7 billion purchase offer for the 112-year-old Newton-based company. Whirlpool is the nation’s largest appliance manufacturer while Maytag is third. A combined company would make Whirlpool the world’s largest manufacturer, ahead of Sweden-based Electrolux.

Maytag shareholders agreed to the $21 per share cash and stock offer last month with federal regulatory approval the final hurdle for the merger to move forward. Both companies have said they do not plan for the acquisition to be finalized prior to Feb. 27, dependent upon clearance from the Justice Department.

While the letter sent to federal regulators cites concerns over the increased concentration within the appliance industry a combined company would hold, especially in the laundry category, Boswell said Thursday that his real concern is the possible loss of Maytag jobs in Newton.

“I’m very concerned about the workers,” Boswell said. “There are no assurances that Whirlpool gives a hoot about Newton.”

The purpose of the letter, Boswell said, is to try to get some sort of commitment out of Whirlpool to retain Iowa jobs.

“I hope to get them to move off center,” he said. “I want them to make a commitment to Newton and the workers. The pressure on the families is terrible.”

Whirlpool has not commented on what the future holds for local production jobs and the future of Maytag‘s corporate headquarters. Most appliance industry analysts speculate that while production operations in Newton might stay, the management operations in Newton would likely quickly close upon completion of the merger.

While the two Iowa lawmakers are recommending that the Justice Department prevent the acquisition, they also suggested an alternative where Whirlpool might be forced to divest Maytag‘s laundry operations.

“At the very least, the Department should require that Whirlpool divest the washer and dryer portions of Maytag to a viable purchaser who will have the financial capability and desire to continue to operate that business,” Boswell and Harkin wrote.

Last May, the Maytag board of directors approved the sale of the company to Ripplewood Holdings, a New York City-based investment firm. At the time, Ripplewood said it planned to continue local operations while it worked to put the company on firm financial footing.

Over the ensuing months, China-based Haier Group and Whirlpool entered the bidding for the troubled Newton company. Whirlpool increased its bid three times before the Maytag board of directors agreed to reject Ripplewood’s $14 a share bid in favor of the $21 offer from its rival in the appliance industry. As part of the new deal approved by the Maytag board in August, Whirlpool agreed to pay a $40 million break-up fee to Ripplewood. Ripplewood said it would continue to be interested in acquiring Maytag should the Whirlpool deal not be completed. The current agreement between Whirlpool and Maytag calls for Whirlpool to pay Maytag $120 million should the merger not be approved.

Boswell noted that he has been attempting for some time to see what might be done to help Maytag continue. Last May, even before any buyout offers were announced, Boswell arranged a meeting between Maytag CEO Ralph Hake and state and local government officials to discuss what actions might be taken to assist the troubled company.

State Sen. Jeff Lamberti, R-Ankeny, who is running for Boswell’s seat, released a letter Wednesday asking Whirlpool CEO Jeff Fettig to consider keeping jobs in Iowa.

“It would be my hope that your company will give strong consideration to retaining the production plant in Newton,” Lamberti’s letter said. “I believe that, by working together, we can meet the needs of your company and retain the jobs at the Newton plant. I would welcome the opportunity to discuss the opportunities with you and offer my assistance.”

Industry analysts leave little hope that Maytag can continue as a viable entity.

“If this transaction fails, I believe Maytag will eventually end up in bankruptcy,” said David McGregor, an appliance industry analyst with Longbow Research of Ohio. “This letter has obvious political motives, but insisting on a divestiture of the entire washer and dryer business makes no sense when the concentration issue — if in fact one genuinely exists — is restricted to mid-line price points.

“If Maytag were a viable business capable of succeeding in an increasingly global industry, it would not be in its current predicament and the board would not have advised shareholders to sell at a 20-year low.”

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