Whirlpool, the largest U.S. appliance maker, offered $1.35 billion in cash and stock for Maytag, topping bids from two other groups and raising antitrust issues.
The $17 a share offer from the Benton Harbor, Michigan-based maker of Whirlpool and KitchenAid appliances beats the $16 bid from China’s Haier Group and the $14 proposal from a consortium led by buyout firm Ripplewood Holdings LLC. Whirlpool, which would assume $969 million in debt, said in a statement yesterday it will decide whether to make a formal offer for the No. 3 U.S. appliance manufacturer by Aug. 9.
Whirlpool, which is snatching market share from Maytag after expanding manufacturing to lower-cost countries and introducing upscale appliances, said a merger would “achieve substantial efficiencies that will deliver cost savings.” The acquisition would give Whirlpool brands such as Maytag, Jenn-Air and Amana and almost 50 percent of the U.S. market in appliances, posing anti- trust concerns, analysts said.
“It makes sense strategically,” Morgan Keegan Inc. analyst Laura Champine, who has a “buy” rating on Whirlpool and a “hold” on Maytag, said from Memphis, Tennessee. “The question about this particular combination is whether they’d run into antitrust issues.”
Shareholders of Maytag are scheduled to vote on the New York- based Ripplewood offer on Aug. 19. The Haier Group along with two private-equity firms are taking a closer look at Newton, Iowa- based Maytag before making an official offer.
“This transaction will provide Maytag shareholders with superior value compared to the current offer,” said Whirlpool Chief Executive Officer Jeff Fettig, 48, in the statement.
Overseas Production
Whirlpool, whose sales growth has averaged 9.6 percent the past two years, is outperforming Maytag because 34 percent of its production is in low-cost countries such as Mexico, Poland and China. High-end products such as Duets, a washer and dryer set that sells for $2,300, have helped increase sales.
Maytag is led by CEO Ralph Hake, 56, a former Whirlpool finance chief. As recently as last year, the company made more than 99 percent of its washers, dryers, refrigerators, ovens and dishwashers in the U.S., according to its Web site. The company, whose sales the past two years have grown an average of less than one percent, posted its first annual loss last year since 1995.
A message left for Ripplewood spokesman Jeffrey Taufield on his mobile phone wasn’t immediately returned. A Haier America spokesperson couldn’t immediately be reached for comment. A message left for Maytag spokesman John Daggett wasn’t immediately returned.
Whirlpool shares fell 86 cents, or 1.2 percent, on July 15 to $69.99 in New York Stock Exchange composite trading. They have gained 13 percent in the past year. Shares of Maytag fell 9 cents to $15.45. They’ve fallen 29 percent this year.
Ripplewood, Haier
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.
Over that time, the offer price fell to $14 a share in May from $23.50, a 40 percent drop, as Maytag reported two consecutive quarters of earnings below analysts’ estimates and twice cut its 2005 profit target. The group is bidding $1.13 billion and has offered to assume about $975 million in debt.
Last month, the group pressured Maytag, saying it might walk away from its offer unless the company quickly resolved talks with the group led by Haier.
Haier, China’s biggest refrigerator maker with $12.2 billion in sales in 2004, may use its factories in China to lower Maytag’s costs and help it compete against Whirlpool. Haier Chief Executive Zhang Ruimin, 56, has focused on selling lower-priced items such as $98 mini-refrigerators and $255 clothes washers at retailers including Wal-Mart Stores Inc.
Antitrust
The $1.28 billion bid from Haier, based in the Shandong city of Qingdao, Bain Capital LLC and Blackstone Group LP, also includes the assumption of $975 million in debt.
Champine said the Whirlpool offer might gain more political support than Haier’s. “From a political standpoint, it’s certainly a more favorable option if you’re a politician than combining with a Chinese manufacturer,” the analyst said.
Whirlpool has 30 to 35 percent of the U.S. market, Champine said. Maytag’s U.S. market share has dropped to 15 percent from about 20 percent in the past few years, which could help alleviate antitrust concerns, she said.
“For Whirlpool shareholders this could be an extremely powerful collection of brands,” said David MacGregor, an analyst with Longbow Research in Independence, Ohio, who has a “buy” rating on Whirlpool and a “neutral” rating on Maytag. “If there’s been a weakness in Whirlpool’s brand lineup, it’s been cooking. With Whirlpool and KitchenAid and now you add to that Maytag and Jenn-Air, that combination could be extremely powerful.”
GE
General Electric Co., with about 20 percent of the U.S. market, is the second-largest U.S. appliance maker. The company is based in Fairfield, Connecticut.
Whirlpool is advised by Greenhill & Co., a New York-based merger and restructuring firm; New York-based Weil Gotshal & Manges and Boston Consulting Group, based in Boston.
(The company has scheduled a conference call to discuss the Maytag proposal at 11:00 a.m. New York time on July 18.)
From Bloomberg