Maytag merger approved

Maytag merger approved
 
Date March 30, 2006
Section(s) Local News
Brief  
 
By Associated Press

and

Daily News Staff

WASHINGTON and NEWTON — Antitrust regulators on Wednesday approved Whirlpool’s proposed $1.79 billion purchase of Maytag, saying the merger would not reduce competition substantially.

The existence of strong rivals and the cost savings the new company would generate indicate “this transaction is not likely to harm consumer welfare,” the Justice Department said.

An investigation by the department’s Antitrust Division found that an effort by the new company to raise prices on its washers and dryers “likely would be unsuccessful” because at least five other companies are well-established in U.S. markets.

Those competitors include the Sears brand Kenmore, General Electric and Frigidaire. The Justice Department also concluded that LG and Samsung and other foreign manufacturers have quickly established themselves in recent years.

“LG, Samsung and other foreign manufacturers could increase their imports to the U.S.,” the department said in a statement. “Existing U.S. manufacturers have excess capacity and could increase their production.”

The government also concluded that large retailers including Sears, Lowe’s, The Home Depot and Best Buy have alternatives available to help them resist any attempt by the combined company to raise prices.

The cost savings and other efficiencies gained by the merger also should benefit consumers, the department said.

The companies had agreed not to close the transaction before today.

This morning, community members were still reacting to the news.

“We have prospered for over 100 years with Maytag. It our fervent hope and objective to continue to prosper with appliance manufacturing in Newton under the Whirlpool label.” State Sen. Dennis Black said in a released statement. “The Dept. of Justice has spoken… the process will continue. Now it behooves local government leaders to work diligently to retain the industry in Newton.”

Newton Mayor Chaz Allen said this morning that local officials already had prepared a list of things Iowa has to offer Whirlpool to keep jobs in state. Grants, the Iowa Values fund, training programs and other incentives head the list. Allen said Whirlpool wanted to wait until the deal closed before sitting down to discussions.

“We’re excited that we have someone to work with now,” Allen said “It’s just a matter of waiting until they sign on the dotted line and then we can talk to them.”

Reuters interviewed Whirlpool Chairman and Chief Executive Jeff Fettig shortly after the U.S. Justice Department approved the combination of the two companies

“We expect to close no later than Monday, April 3,” Fettig said.

After that, Allen expects meetings to being in earnest. He hopes officials can convince Whirlpool to keep Maytag jobs in Iowa.

Maytag and Whirlpool released a joint statement about the decision.

“We are pleased with the Department of Justice’s decision and look forward to closing the transaction, and begin the intergration of our business,” Fettig said. “The combination of Whirlpool and Maytag will create substantial benefits for consumers, trade customers and shareholders through continued development of innovative products, improved quality and service and cost efficiencies.”

“Our merger with Whirlpool provides fair value to Maytag shareholders,” Maytag chairman and CEO Ralph Hake said. “This transaction will enhance the competitiveness of the Maytag brands with new innovation and greater global reach to a broader base of consumers through Whirlpool’s established sales and manufacturing capabilities.”

Reaction to the announcement by local residents at the Mid-Town Cafe was mainly optimistic this morning.

“So be it. Now that this long-lasting controversy is over, let’s get back to the business at hand,” said John McNeer, a former Maytag employee. “We still have a good future.”

Jerry Castonguay said the ruling by the Justice Department was unexpected.

“It was a little bit of a surprise,” he said. “I thought the share of the market would require them (Whirlpool) to divest themselves of the top-loading machines.”

Some analysts and antitrust lawyers had expected the Justice Department to object to the deal. The merger would create a company producing half of the dishwashers in the United States and more than 70 percent of the clothes washers and dryers.

Such a rise in market concentration has typically drawn a challenge from the government.

Whirlpool, based in Benton Harbor, Mich., is the largest appliance manufacturer in the United States. Maytag is number three, behind GE Consumer products.

The antitrust division has been reviewing the proposed merger since September. The companies announced that they had signed a definitive merger agreement in August.

The government asked for more time to review the merger last month, prompting wide speculation that it was preparing to challenge the deal.

Whirlpool offered to pay $21 a share for Maytag. Including the assumption of $977 million of Maytag debt, the entire deal is valued at about $2.7 billion.

Whirlpool won a bidding match last summer that included a $14 per share bid by New York investment firm Ripplewood Holdings and investment partners. China’s Haier America, backed by Bain Capital and Blackstone Group had bid $16 per share to acquire Newton, Iowa-based Maytag, whose brands include Maytag, Amana, Hoover, Jenn-Air and Magic Chef.

Whirlpool racheted up the bidding from its initial $17 offer to $21 to entice Maytag away from the Ripplewood group. Maytag initially expressed concerns about whether a merger with Whirlpool would get federal approval, but signed an agreement after Whirlpool offered to pay a $40 million termination fee to get Maytag out of its agreement with Ripplewood.

Maytag shares rose $4.73, or 27.7 percent, to close at $21.81 on the New York Stock Exchange Wednesday. Shares were down a little to $21.52 in early trading, but still remained above the $21-per-share offer from Whirlpool.

Whirlpool shares gained $6.38, or 7.1 percent, to close at $95.95 on Wednesday.

UAW president Ted Johnson declined to comment on the merger this morning.

——

Daily News reporters John Jennings and Andy Karr and AP reporters Mark Sherman and David Pitt contributed to this story.

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