GE Increases Its Bid, Files Lawsuits to Block Whirlpool’s Run at Roper

A battle over the kitchen stove heated up Monday as General Electric Co. and Whirlpool Corp. continued to slug it out for control of an important manufacturer of gas and electric ranges.

The fight for Roper, which makes Kenmore ranges for Sears, got nastier and more expensive as GE increased its bid to $507.6 million and filed lawsuits to stop rival Whirlpool from acquiring the Augusta, Ga.-based appliance maker.

GE’s new offer of $54 a share topped Whirlpool’s last offer of $50 a share, or $470 million. But investors seemed to think the price will go still higher.

In composite trading Monday on the New York Stock Exchange, Roper shares closed at $55.50, up $2.50 a share, indicating that traders expected Whirlpool, or a possible third bidder, to raise the ante.

“It’s pretty crazy the extent to which this is going,” said Nicholas Heymann, an analyst with Drexel Burnham Lambert Inc. “There are a lot of different issues at stake here,” he said, explaining that both GE and Whirlpool see the Roper acquisition as accomplishing important strategic goals.

Roper has an important share of both the electric and gas stove markets. In 1986, it made 12% of all electric stoves and 14% of the gas stoves. Neither Whirlpool nor GE makes gas stoves, although both sell gas ranges under their own brands. (Caloric makes gas ranges sold by Whirlpool and Magic Chef makes Hotpoint ranges sold by GE.)

Whirlpool has more to lose and GE has more to gain in the outcome of the bidding war, said Drexel Burnham’s Heymann.

GE has an opportunity to significantly increase its market share in gas ranges, Heymann said, while acquiring in-house manufacturing capacity that will allow it to provide consistently high-quality products to customers at lower costs.

GE entered the gas range market about three years ago but doesn’t manufacture its brands. The Roper acquisition would increase GE’s share of the fast-growing gas range market to 30%, he said. “By improving quality and lowering cost, they could quickly go to 40% or 45%,” he added.

Whoever wins Roper will also gain important business with Sears, Roebuck & Co., a major retailer of appliances. Roper, which had 1987 sales of $702.5 million, does almost all of its business with Sears. It manufactures the Kenmore brand, among other products, for the retailer.

The Sears business will be “an additional benefit, but I think the key to this deal is the manufacturing capacity,” said Mark Altman, an analyst with Paine Webber Inc.

Whirlpool doesn’t want to lose market share, Heymann said, but more importantly Whirlpool has some $400 million in excess cash that it needs to spend.

That cash on its balance sheet makes the company more vulnerable to a takeover, he said. GE’s lawsuits were in response to a lawsuit Whirlpool filed Friday, charging that GE illegally interfered with its merger agreement with Roper.

GE accused Roper’s board of directors in a Delaware state court suit of violating their duties to shareholders by not adequately reviewing Whirlpool’s offer and by concealing the fact that GE had expressed a prior interest in Roper.

In addition, GE said Roper should not have recommended shareholder acceptance of Whirlpool’s revised $50-a-share offer without giving GE the opportunity to increased its then $45-a-share offer.

The suit seeks to block provisions of the Roper-Whirlpool merger agreement which GE said hampers its ability to bid competitively for Roper.

The suit also names Whirlpool, which started the seesaw bidding for Roper in February with a $37.50-a-share bid. GE accused Whirlpool of “inducing and aiding and abetting” the Roper violations.

The suit charged that Roper improperly tried to “lock up” the Whirlpool merger with contract terms including an option provision granting Whirlpool the right to acquire 1.6 million newly issued Roper shares (about 18.5% of the total outstanding) at $37.50 a share.

If Whirlpool decides not to buy the shares, the contract requires Roper to pay Whirlpool the difference on those shares between the final price offered by another bidder and $37.50.

The suit also challenged a provision allowing Whirlpool to acquire Roper shares through a “street sweep.”

In a second lawsuit, filed in U.S. District Court in Delaware, GE charged that Roper and Whirlpool provided inadequate disclosure in their public filings with the Securities and Exchange Commission. GE cited the failure to disclose GE’s interest and a failure to disclose all terms of the Roper-Whirlpool merger agreement.

Whirlpool declined comment on the GE suits. GE said Whirlpool’s earlier suit “grossly exaggerated the facts and was totally without merit.

In a statement, Whirlpool said it remains committed to buying Roper, but officials refused to say whether Whirlpool would increase its bid.

Roper also declined comment on GE’s legal attacks. However, the company said it expects its board to meet next week to consider GE’s revised offer.

ELECTRIC RANGE MAKERS 1986 Sales: 3,318,000

General Electric: 29%

Whirlpool: 15%

White Consolidated: 14%

Roper: 12%

Others (including Tappan, Magic Chef, Caloric, Hardwick, Jenn-Air): 30% Source: Appliance Magazine

GAS RANGE MAKERS 1986 Sales: 1,939,000

Tappan: 25%

Magic Chef: 23%

Caloric: 17%

Roper: 14%

Others (including Hardwick, White Consolidated, Brown): 21% Source: Appliance Magazine

APPLIANCES: WHO HAS WHAT? (1985 estimate, percentage of households*)

Refrigerators: 99%

Washers 70%

Dryers 66%

Electric Ranges 62%

Disposers 45%

Dishwashers 47.5%

Freezers 42.5%

Gas Ranges 42.0%

Room Air Conditioners 27%

Microwave Ovens 49%

Dehumidifiers 11%

Compactors 4.0% Source: Appliance Magazine, Association of Home Appliance Manufacturers Assn. * Based on Census Bureau estimate of 86,789,000 occupied housing units in 1985.