China’s Haier Group dropped out of the three-way bidding contest for Maytag Corp., leaving Whirlpool Corp. and Ripplewood Holdings LLC to contend for the No. 3 U.S. appliance maker.
Maytag said in a statement today that Haier, along with Bain Capital LLC and Blackstone Group LP, indicated in a letter that they would no longer try to buy the Newton, Iowa-based company. The $16 a share bid on June 21 from the group led by Haier, the largest refrigerator maker in China, was topped this week by Whirlpool’s $17 offer. It will compete for the maker of Maytag, Jenn-Air and Amana appliances with buyout firm Ripplewood’s $14 a share bid.
Haier may have decided a purchase of Maytag would be too expensive because of the resources required for a Chinese company to compete in the U.S. market, said Bruce Richardson, head of research at Evolution Securities China Co. in Shanghai. In Maytag it also faced a company that is losing market share to Whirlpool, the No. 1 U.S. appliance maker, due to higher production costs and less appealing products.
“Chinese companies look at the need to expand and balance that against the real cost of expansion, and they sometimes decide to take a breather,” Richardson said. “When you decide you’re going to penetrate a market, there’s a whole new way of looking at your business. There’s a limit to what they want to pay for and there’s a limit to how much they can absorb.”
Whirlpool shares rose $2.12, or 2.9 percent, to $75.43 in New York Stock Exchange composite trading. Before today, they had gained 18 percent in the past year. Shares of Maytag rose 5 cents to $17.53. They’ve fallen 19 percent in the past year before today.
John Ford, Blackstone Group spokesman, declined to comment, as did Bain Capital spokesman Sam Hollander and Haier spokesman Ji Guangquang.
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Maytag spokesman John Daggett and Whirlpool spokesman Steve Duthie also declined to comment.
Ripplewood, Goldman Sachs Group Inc.’s GS Capital Partners and J. Rothschild Group have been trying to acquire Maytag since at least December 2004, according to a filing with the U.S. Securities and Exchange Commission. The Maytag board will vote on the groups $1.13 billion offer on August 19.
Maytag, which has reported two consecutive quarters of earnings below analysts’ estimates and twice cut its 2005 profit target, is suffering from high costs. Maytag made more than 99 percent of its washers, dryers, refrigerators, ovens and dishwashers in the U.S. as of last year, according to its Web site. About 34 percent of Whirlpool’s production is in low-cost countries such as Mexico, Poland and China.
A Whirlpool purchase of Maytag would give the combined company almost 50 percent of the U.S. market and face antitrust scrutiny. Whirlpool, based in Benton Harbor, Michigan, has 30 percent to 35 percent of the U.S. market, Morgan Keegan Inc. analyst Laura Champine said. Closest rival General Electric Co. in Fairfield, Connecticut, has about 20 percent. Maytag’s U.S. market share has dropped to 15 percent from about 20 percent in the past few years, and that may alleviate some antitrust concerns, Champine said.
From Bloomberg
