Newton-based Maytag will pay a $40 million fee to Ripplewood Holdings if it walks away from a purchase agreement between the two companies, according to papers filed Monday with the U.S. Securities and Exchange Commission.
On the New York Stock Exchange, Maytag shares rose again amid conflicting speculation about whether another po- tential buyer might emerge.
Debate also continued about whether Ripplewood’s $14-a-share offer for the company is adequate.
An investment fund manager told Barron’s Online the price was “thievery.” One analyst, however, described the offer as “highly favorable for Maytag’s current common shareholders.”
Maytag, the nation’s third-largest appliance maker, announced Thursday it had agreed to be purchased by an invest- ment group led by New York-based Ripplewood in a $2.1 bil- lion deal.
The purchase, subject to shareholder and other approval, would turn Maytag into a privately owned company. Maytag’s stock is now traded on the New York Stock Exchange.
Virginia Blackburn, an associate professor of management at Iowa State University, said termination fees are common in deals such as Ripplewood’s proposed purchase of Maytag.
“There are a lot of costs associated with an acquisition by the acquiring party,” Blackburn said. “And nobody wants to get right in the middle of it and have one of the parties call it off.”
Maytag will have to pay $40 million if the purchase agreement is terminated for certain reasons – for example, if Maytag vacates the deal or Maytag shareholders reject the offer in favor of another bid.
Blackburn said the $40 million amount “doesn’t sound unreas- onable to me.”
Sam Darkatsh, an analyst for Florida-based Raymond James & Associates, estimated in a newsletter Friday that a termination fee might run between $40 million and $60 million.
Maytag shares closed Monday at $15.39, up 99 cents from Friday’s end-of-the-day price.
Shares are up $3.83, or 33 percent, from a close of $11.56 on Thursday, just before the proposed purchase was an- nounced.
Market watchers suggested that investors were expecting other bids to emerge or a sweetened offer from Ripplewood to win shareholder approval.
Online business sites buzzed with speculation about other suitors, naming nearly every major appliance maker: Samsung, LG Electronics, Electrolux, General Electric, Whirlpool and Siemens.
Nicholas Heymann, an analyst for Prudential Equity Group in New York, wrote in a memo to clients on Monday that Prudential analysts “don’t expect any competing offers to emerge.”
Heymann described the offer as “fortunate news” for Maytag shareholders and said the $14-a-share price “is highly favorable” for current share owners.
In an interview with Barron’s Online, Warren Isabelle, president of Ironwood Capital Management, described Ripplewood’s $14-a-share offer as “thievery.”
“We’re hoping a higher bidder comes along,” Isabelle said, adding that Ironwood’s shares would be voted against the buyout. Ironwood, a Boston-based investment fund, owned 356,450 shares, based on March figures.
The papers filed with the securities commission also show that Maytag may pay up to $3 million in retention bonuses to keep “key employees.”
The bonuses don’t apply to primary company executives, the papers said.
From The Des Moines Register