Whirlpool offer for Maytag seen as bid to block Chinese
RETAIL Whirlpool offer for Maytag seen as bid to block Chinese One analyst sees a bidding war for appliance maker By SHIRLEY WON Tuesday, July 19, 2005 Page B8
Appliance giant Whirlpool Corp. has proposed a $1.35-billion (U.S.) bid for Maytag Corp., a move that will help wring out costs by buying the iconic American brand known for washers -- and keep it out of the hands of a low-cost Chinese rival.
The $17-a share cash and stock offer by the largest U.S. maker of appliances, which sells under such brand names as KitchenAid and Whirlpool, tops two earlier bids by China's Haier Group and Triton, an entity organized by New York private equity firm Ripplewood Holdings LLC.
But some observers yesterday suggested Whirlpool's move, which would give it almost 50 per cent of the U.S. appliance market, is a defensive tactic.
Analysts see Whirlpool trying to keep Haier from increasing its share in North America by buying the strong Maytag name and combining it with low-wage manufacturing.
"I don't think that they'd like Maytag to fall into the hands of a Chinese competitor, said Eric Bosshard, an analyst at FTN Midwest Research in Cleveland.
Haier, China's largest refrigerator maker based in Qingdao, can produce good, low-cost appliances, but it doesn't have a name in North America, and Maytag "would give them the brand with which to compete," Mr. Bosshard said.
David Silver, an analyst at New York-based Wall Street Strategies, agrees that the Whirlpool bid is a "defensive offer," and expects Haier to outbid Whirlpool. "I think it [the winning bid] is going to be upwards to $19 a share.," he said.
"Haier can definitely afford to do so," Mr. Silver said. "They are the largest producer of appliances in China, and the Chinese are not as demanding as American investors in that it doesn't have to be every quarter that they see a profit. They are willing to take a loss in one or two quarters to see a large gain in the future."
Whirlpool, based in Benton Harbor, Mich., said late Sunday that its offer of $17 a share for Maytag represents a 21-per-cent premium on Maytag's first offer of $14 a share from the group led by Ripplewood in May.
Shares of Maytag closed up $2.03 or 13 per cent at $17.48 on the New York Stock Exchange yesterday, suggesting investors expect a higher bid in what is now a three-way race.
Last month, Maytag, which also sells appliances under the Jenn-Air and Amana labels, said it was considering a proposed $1.28-billion bid from China's Haier along with private equity funds Blackstone Group LP and Bain Capital LLC.
Jeff Fettig, chief executive officer of Whirlpool, told a conference call with analysts that that deal for Maytag is "a great strategic fit," saying there is a lot of cost-cutting that can take place by putting the two firms under one roof.
Mr. Fettig said he also believes Whirlpool would have no problems getting regulatory approval for the proposed deal for Maytag. Whirlpool expects to decide by Aug. 9 whether to make a formal offer.
Maytag, based in Newton, Iowa, said in a statement yesterday that its board of directors will consider the Whirlpool proposal, but said it has not changed its mind about its existing deal with the Ripplewood-led transaction.
Laura Champine, an analyst at Morgan Keegan & Co. in Memphis, said she was not surprised by Whirlpool's bid for Maytag.
"Whirlpool has enormous potential synergies with Maytag" in such areas as raw material costs, procurement and research and development, Ms. Champine said. "It's a great combination for both companies."
Whirlpool has 33 to 35 per cent of the U.S. appliance market, while Maytag is the No. 4 producer with about 15 per cent, she estimates. But she said she does not believe Whirlpool needs to own Maytag.
Lonely no more
The number of possible competing offers for U.S. appliance maker Maytag grows to three as Whirlpool joins the fray. The winner will have to take on Maytag's $969-million (U.S.) debt and close factories to cut costs and battle foreign competition.
THE TARGET: Maytag Corp.
The company: A $4.7-billion appliance maker
Headquarters: Newton, Iowa
Employees: About 18,000 people
Factories: More than 15 in the U.S. and Mexico
Brands: Maytag, Amana, Hoover, Jenn-Air, Magic Chef
THE DEADLINE: Aug. 19
The date Maytag shareholders will vote on a takeover
THE NEW BIDDER: Whirlpool Corp.
Whirlpool Corp. yesterday entered the bidding war for its rival with a cash and stock offer.
Headquarters: Benton Harbor, Mich.
Employees: 68,000
Factories: About 50 world-wide
2004 Sales: $13-billion
Brands: Whirlpool, KitchenAid, Brastemp, Consul
THE OFFER: $17 a share
THE APPROVED BIDDER: Ripplewood Holdings
Maytag's board on June 20 agreed to be bought by Triton, an entity led by New York investment company Ripplewood Holdings LLC, which is expected to accelerate Maytag's move to offshore production. Investors include RHJ International, GS Capital Partners and J. Rothschild Group.
THE OFFER: $14 a share
THE WILD CARD: Bain Capital, Blackstone Group, Haier
U.S. private equity companies Bain Capital, Blackstone Group and China's Haier have teamed up to bid for Maytag, but no formal offer has been made. However, Maytag has held talks with the group. Haier is China's largest appliance maker, with $12.2-billion in global sales last year.
THE OFFER: $16 a share
SOURCES: GLOBE AND MAIL, REUTERS, ASSOCIATED PRESS, COMPANY REPORTS
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