Maytag to Buy Chicago Pacific for $1 Billion

Maytag Corp. and Chicago Pacific Corp. have agreed to a merger that would put Maytag and Hoover--household names in household appliances--under the same corporate roof.

Maytag would acquire Chicago Pacific’s businesses--the Hoover vacuum operation, five furniture firms and foreign appliance lines--under a $1-billion agreement approved by the firms’ directors Sunday. Maytag will make an offer for 49% of Chicago Pacific’s outstanding shares at $60 cash per share by Oct. 31.

The remaining 51% would be swapped for $60 in Maytag stock under the agreement.

“This merger marks a significant milestone for Maytag because it helps enhance our growth opportunities,” Maytag Chairman Daniel J. Krumm said.

The merger gives Maytag access to foreign markets, boosting its long-term prospects, according to industry analysts. Chicago Pacific’s kitchen appliances, washers and driers are leading sellers in the United Kingdom and Hoover is the top-selling vacuum line in the United States. Appliance operations in Australia and Europe generate 65% of Chicago Pacific’s revenue.

‘Strong Fit’

“It’s a very good deal long-term,” said Mark Hassenberg, an analyst at DLJ Securities in New York. “The fit is very strong and positive . . . Domestically, the vacuum cleaner business is doing very well.”

Maytag, based in Newton, Iowa, earned $152.7 million on sales of $1.9 billion in 1987. By adding a new line and gaining new markets through a merger--Chicago Pacific earned $954,000 on sales of $1.4 billion in 1987--Maytag is bolstering itself in an industry facing a possible sales decline, according to analysts. Hassenberg predicted a 5% decline in U.S. appliance sales in 1989.

Maytag, which ranks fourth in U.S. appliance sales, expects to complete the merger by next February. Chicago Pacific’s shareholders are expected to vote on the stock swap portion of the deal sometime this year, and analysts predicted that shareholders will approve the deal.

“It’s a nice price for them,” Hassenberg said. “It’s a good deal for (Chicago Pacific) shareholders and their management.”

Some analysts questioned Maytag’s offer. “They may have paid too much,” said E. Magnus Oppenheim, head of a New York investment firm that bears his name.

Furniture Units May Go

Maytag may pay back some of the acquisition’s cost by selling the furniture operations of Chicago-based Chicago Pacific, some analysts speculated. Among the five Chicago Pacific furniture lines are El Monte-based Brown Jordan, a maker of rattan and patio furniture, and San Francisco-based McGuire, which makes living room furniture.

“Furniture is not in their line of expertise,” said James Bellessa, an analyst at D. A. Davidson. “There’s better than a 50% chance that the furniture operations will be sold.”

Maytag has no immediate plans to sell the furniture operations, spokesman James G. Powell said. Powell also disputed rumors on Wall Street that Maytag may have sought Chicago Pacific to increase its corporate debt and thus make itself less attractive to potential corporate raiders. Maytag and Chicago Pacific have been rumored to be takeover targets at times this year.

“We do not view this as a defensive move,” said Powell. “It’s an excellent business opportunity. . . . We see it as an excellent fit of two companies with very strong brand names and no overlapping markets.”