Whirlpool in Deal for Maytag
Whirlpool Corp. said on Monday that it reached a definitive agreement to buy smaller rival Maytag Corp. for $1.7 billion in cash and stock, capping months of bidding for the U.S. appliance icon.
Maytag paid $40 million to sever its buyout pact with private equity firm Ripplewood Holdings and had been reimbursed for those funds by Whirlpool, the companies said.
Maytag would be acquired for $21 a share, with Whirlpool assuming $977 million of Maytag debt. Whirlpool expects the acquisition to close as early as the first quarter of 2006, after Maytag shareholder approval and U.S. regulatory clearance.
The deal would make Whirlpool the world’s largest appliance maker and follows months of bidding for Maytag -- ailing because of high fixed costs and rising competition -- that began in May with the Ripplewood offer of $14 a share, or $1.1 billion.
A Whirlpool acquisition would create an appliance powerhouse with well-known brands and sales of $17.9 billion, based on 2004 results. Maytag makes Hoover vacuums and Jenn-Air and Amana appliances; Whirlpool’s brands include KitchenAid, Roper and Inglis.
“It’s a win-win situation,” said Caroline Cai, an analyst with Pzena Investment Management, which owns shares in both appliance makers.
She said Whirlpool could turn around Maytag’s operations more quickly and improve the profit margins.
“There’s some inherent advantage to the size of Whirlpool when it comes to purchasing leverage or the ability to optimize production platforms on a global basis,” Cai added. “These are the kinds of things that Maytag, given size and geographic limitations, would not have been able to execute on its own.”
Close antitrust scrutiny is expected. In the U.S., Whirlpool, of Benton Harbor, Mich., is the No. 1 appliance company, while Newton, Iowa-based Maytag is the third-biggest.
“I think Whirlpool will clear” the Federal Trade Commission, said Longbow Research analyst David MacGregor, who added that the companies might be required to shed some assets.
In a statement, Ripplewood Chief Executive Timothy Collins, who expressed interest in Maytag as far back as March 2004, wished the company well.
“We have carefully considered all our options and concluded that it is not in the best interests of Ripplewood and our investor group to match Whirlpool’s offer or submit a new bid for Maytag,” Collins said.
Maytag canceled a shareholders meeting that had been set for Sept. 9 to vote on the Ripplewood deal.
Whirlpool raised its offer for Maytag three times since initially bidding $1.3 billion, or $17 a share, in mid-July. A group including Chinese appliance maker Haier had made an informal bid of $16 a share for Maytag in June, but withdrew it days after Whirlpool’s first offer.
As part of the deal, Maytag investors will receive $10.50 in cash and a fraction of a Whirlpool share for each of their shares.
Maytag’s shares eased 2 cents to $18.69, while Whirlpool shares fell 35 cents to $81.48.
