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Maytag Embraces Buyout Offer of More Than $1.7 Billion in Cash and
Stock From Whirlpool
DES MOINES, Iowa (AP) -- With a rival bidder backing away from the table, Maytag Corp. embraced a
buyout offer of more than $1.7 billion in cash and stock from the nation's largest appliance maker,
Whirlpool Corp.
As the companies announced Monday they had signed a formal agreement, Whirlpool CEO Jeff Fettig
offered reassurances that the combination of Whirlpool and Maytag, the nation's third largest appliance
maker, will gain approval of federal antitrust regulators.
A combined Whirlpool-Maytag company would capture about 48 percent of the market in major
appliances in the United States, analysts have estimated. General Electric Co. would have about 26
percent and Sweden's Electrolux AB would have about 20 percent of the U.S. market.
Whirlpool-Maytag would control as much as 70 percent of the U.S. laundry market, a figure that
analysts said would likely generate close government scrutiny.
A statement released by both companies said regulatory approval and closing of the deal could be
completed as early as the first quarter of 2006. But some observers say the Federal Trade Commission
could take longer.
"The market is speculating that the deal will take longer to close and will have more of a problem
clearing FTC approval than Whirlpool is intimating," said David MacGregor, an analyst with
Cleveland-based Longbow Research.
Absent an industry challenge, completion in the first quarter could be realistic, he said.
A spokeswoman for GE, which currently is the nation's second largest appliance manufacturer, said
the company isn't commenting on antitrust issues regarding the proposed merger.
A spokesman for Electrolux did not immediately return a call seeking comment.
Under terms of the deal, Maytag will be acquired for $21 a share. Whirlpool is also assuming $977
million of Maytag debt.
Maytag shareholders, who also must approve the deal, will vote on the proposal before the end of the
year, the company statement said.
Maytag terminated its earlier deal to be acquired for $1.13 billion, or $14 a share, by a New York-based
investment group led by Ripplewood Holdings. Maytag paid a $40 million termination fee, and is being
reimbursed by Whirlpool. A Sept. 9 shareholder's meeting to vote on the Ripplewood deal was
canceled.
Maytag shares fell 2 cents to close at $18.69 on the New York Stock Exchange, while Whirlpool
shares lost 35 cents to finish at $81.48.
Ripplewood decided against increasing its offer for Maytag, effectively bowing out of the bidding
process.
"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," said
Timothy C. Collins, chief executive officer of Ripplewood, in a statement.
Maytag's board of directors reversed its support of the Ripplewood offer on Aug. 12 and said it planned
to pursue the higher Whirlpool deal.
Maytag shareholders will receive $10.50 in cash and a fraction of a Whirlpool share for each Maytag
share. They will get 0.1144 of a share of Whirlpool stock if the average Whirlpool stock price is $91.79
or greater in the 20 days before the closing of the deal and 0.1398 if it is $75.10 or less; between the
two prices, the exchange ratio will vary proportionately.
A statement from Maytag's lead director Howard Clark said the Ripplewood deal was reevaluated and
the board concluded "that the Whirlpool agreement is superior and is in the best interest of our
shareholders."
Fettig, the Whirlpool CEO, said the combination of Whirlpool and Maytag will create substantial
benefits for consumers, trade customers and our shareholders.
"This transaction will enable us to achieve significant efficiencies and better asset utilization. It will also
allow us to offer a wider range of products to a much broader consumer base," he said in a statement.
Maytag brands include Hoover, Jenn-Air, Magic Chef and Amana. The company reported a loss of
$9 million, or 11 cents a share in 2004, compared to a profit of $120.1 million, or $1.53 per share, in
2003. Sales fell 1.5 percent from 2003.
Whirlpool, which sells appliances under the KitchenAid, Roper, Consul and other brands, earned $406
million, or $5.90 per share in 2004 compared with $414 million, or $5.91 per share, a year earlier. Net
sales rose about 6 percent.
Maytag CEO Ralph Hake addressed fears of job losses in a combined company.
"I do recognize that in any combination like this, where duplicate positions may exist, it is reasonable
to expect that some jobs will be eliminated," he said in a letter to employees, which was filed with the
Securities and Exchange Commission.
Hake said Fettig assured him that "the best talent and contributors available" from both companies will
be offered jobs in a combined company through a fair and open evaluation process.
Whirlpool spokesmen Steve Duthie said it's too early to discuss plant closings, the fate of Maytag's
corporate headquarters in Newton and job losses in general.
He declined to say whether all the brands sold by both companies would survive.
Also undetermined is the fate of the iconic Ol' Lonely, the idle repairman made famous by decades of
exposure in print and television ads.
"We're months away from making any of those kinds of decisions," he said.
Sucking the Life Out of Hoover
As rivals abroad continue to underprice it by huge margins, one factory worker tries to cope with her
fading prospects for a job in Ohio Melissa Knight, 28, has been a single mother for the last
three-and-a-half years. Now, she's unemployed, too. She was laid off from Maytag's Hoover
floor-care factory in North Canton, Ohio, in June. She had been cut loose for several weeks in 2003
and again in 2004, but both times she got recalled as inventories were worked off.
Knight might be back at the plant in late August, as Hoover adds a second shift to one of its production
lines. But she doesn't know if the job will last the year. "I'm afraid to get my hopes up," she says.
Over the last six years, Knight was a "Jill of all trades" at the factory. She drove a forklift, worked on the
assembly line, and built electric motors and seals -- "whatever they needed." This was her second
factory job.
"WISH IT WAS ME." Previously, she had worked at a nonunion metals-casting shop nearby. That job
paid only $7.50 an hour. At Hoover she was making more than $15 an hour. Plus, she got benefits that
she thought were wonderful - among the best offered in north central Ohio -- even after she and other
hourly co-workers had their wages frozen and began paying health-care premiums and expenses under
a concessionary labor pact in late 2003.
Knight and her daughter, Madison, live in a house she rents from an aunt who still works for Hoover. Her
home is literally two houses away from the factory, so Knight is reminded constantly about what she has
lost. "I watch the people walk in everyday and wish it was me," she says. "It's sad."
MADE IN CHINA. Why did Knight lose her job? Maytag has been getting killed by competitors who make
their vacuum cleaners in China and have been able to underprice Hoover models by incredible margins.
You can get a Chinese-made upright vacuum cleaner for well under $100 at Wal-Mart , Target , or
Sears . Hoovers generally started at upward of $200. Not surprisingly, Hoover has
lost market share, though it still was No. 1 in upright cleaners in 2004.
Maytag's response was to get concessions from the plant's union, the International Brotherhood of
Electrical Workers, and to trim its workforce in North Canton, where Hoover began in 1908. Then it
started shifting production itself, outsourcing the work to its own maquiladora in Mexico, as well as
outside shops in Asia, including China.
MORE LAYOFFS? With 320 workers dismissed so far in 2005, the headcount is now under 900,
according to the union - a far cry from the 2,200 employed five years ago.
And more folks could be out of work soon. Today, the factory primarily makes steam vacuums, which
still warrant higher prices. But cheap imports are beginning to steal market share from Hoover in this
line as well.
Management told the union in July the company will transfer more work to its border factories in Juarez,
Mexico, and El Paso, Tex., in early 2006. The union figures that will mean 150 more layoffs.
WHAT'S AHEAD? Local 1985 President James A. Repace worries that the plant could be shut down
entirely in 2008 when the current contract runs out. One reason: Maytag says despite employee
concessions and white-collar layoffs, it's the second-highest-cost plant in the company, because of its
relatively well-paid and senior workforce.
Ironically, Hoover began notifying laid-off workers in mid-August that it'll rehire some of them as it ups
production of its steam-vacs. But no one knows if this is only to build up inventories so retailers don't
get shorted because of the transition to Hoover's maquiladora or an about-face in corporate strategy.
Maytag declines to comment on its plans.
Another unknown is what Maytag's new owner will do with the entire Hoover subsidiary. Whirlpool on
Aug. 10 sweetened its takeover bid for Maytag to $2.7 billion, or $21 a share, to ace out
Ripplewood Holdings, which earlier offered $2.1 billion.
GETTING BY. But Whirlpool may not save Hoover, either. The Benton Harbor (Mich.) company j
ettisoned its own floor-care business years ago. Some former Hoover employees have found new work,
mostly in the service sector. But even those jobs aren't plentiful. Ohio's unemployment rate, at 6.1%
in June, was the sixth worst in the U.S.
For now, Knight is getting by on unemployment compensation, which comes to just half of her old pay.
Because she can now be home with her daughter, she no longer has to pay for day care, so the cut in
income doesn't seem that deep. She also gets a pretty good deal on rent since her aunt owns the
house. And Knight had just finished paying off her 2000 Ford Focus before she got laid off.
Still, she has cut back on expenses. "I minimize, and I watch what I spend," she says. "I make sure my
daughter's got clothes on her back and food on the table. That's about it. I can't live on unemployment
forever."
"I LOVE FACTORY WORK." She also looks for new work, but had no prospects until Maytag started
recalling workers. Her old employer in the casting business has said she could return -- at $7.50 an
hour. That would be no better than subsisting on unemployment, she points out.
She would like to get another well-paying job in manufacturing. "I love factory work," she says. "I'm not
a desk person. I like people, but I don't like to have to deal with them all them time."
In her view, plenty of parties share responsibility for her plight. She blames Maytag management for
not running a better company and President George Bush and others in Washington for allowing or
even encouraging a flood of cheap products from China and elsewhere.
She would like the government to put duties on these goods, making them priced more like products
made in the U.S. And she blames her fellow citizens. "The American economy wants cheaper things,
and we want everything today," she says. Knight doesn't spare herself when it comes to doling out
blame. She admits: "I'm guilty of this, too."
Maytag Corp. to Lay Off 200 Workers at Its Flagship Laundry Plant
DES MOINES, Iowa (AP) -- Maytag Corp. said Friday it will lay off 200
workers at its flagship laundry plant next month, reducing the work force to
its lowest levels in nearly 60 years.
The layoffs, effective Sept. 6, will leave the plant with about 1,000 production
workers, union officials said. The plant hasn't seen employment levels that
low since the late 1940s, said Dwain Van Roekel, a retired payroll manager.
Maytag increased production to well above 1,000 in 1948 when the company
expanded to begin making automatic clothes washers, said Van Roekel. He
began working at Maytag in 1946 and retired in 1990.
The pending sale of Maytag also has generated nervousness that if rival
Whirlpool Corp. is the new owner, it will close factories such as the Newton
plant and the corporate headquarters.
The plant had employment as high as 2,500 three years ago. Union officials
with the United Auto Workers Local 997 have reported employment of between
1,200 to 1,300 within the past year. The plant has seen several rounds of
layoffs and many of those workers never returned, finding new jobs or making
other plans.
WHIRLPOOL BIDS AGAINST ITSELF!
A buyer bidding against himself is every auctioneer's dream. Since entering
the battle for Maytag domestic appliance maker Whirlpool has raised three
times with no new bids from rival suitor Ripplewood. Yet it is not as bizarre
as it seems. Wednesday's increase to $21 a share appears to have come in
response to Ripplewood's plan to raise its bid from $14 to $15.50.
More importantly, Whirlpool has needed to convince the Maytag board that
it is offering enough to offset the risk of regulators blocking the deal. At best,
it will close next year. At worst, it will not close at all. Ripplewood in contrast
is offering cash, now.
The Maytag board is right to worry. A combined group would have uncomfortably
high market shares, particularly in the laundry segment. Arguably, barriers
to entry are low for Asian domestic appliances makers, and retailers such as
Home Depot are big enough to look after themselves. However, strong
brands and distribution clout are important. In fact, Whirlpool has tacitly
admitted the scale of the regulatory risk by offering such a premium to
Ripplewood's bid.
If Whirlpool wins, the regulatory process could drag well into next year. If
the deal were then blocked, Whirlpool would pay Maytag $120m. But the
delay could have caused serious damage to Maytag's business. Its shares
are now trading at $19 a 10 per cent discount to Whirlpool's offer. If
Whirlpool is not forced higher, that feels too narrow to justify the risks
involved.
Whirlpool Must Make Maytag Offer in Week
DES MOINES, Iowa (AP) -- Whirlpool Corp. must submit a firm offer to buy Maytag Corp. no later than noon next
Tuesday, according to an agreement between the two companies outlined in documents filed Tuesday with the
Securities and Exchange Commission.
A confidentiality agreement between Whirlpool, the nation's largest appliance maker, and Maytag, the third largest,
signed July 26 specifies that for a period of three years after Maytag opened its books to Whirlpool, either company
cannot try to acquire control of the other without permission.
Newton, Iowa-based Maytag must have 96 hours plus five days to consider any changes in the Whirlpool offer, such
as an increase in the per-share value of the offer. Whirlpool's offer, which remains tentative, stands at $18 per share,
or $1.43 billion.
Triton Acquisition Holding Co., an investment group led by New York-based Ripplewood Holdings, has offered $14
per share, or about $1.13 billion. Maytag shareholders are scheduled to vote on that offer at 10:30 a.m. on Aug. 19.
Shareholders were told in the documents that if they have already voted for the Triton deal by mail, telephone or Internet,
they can change their vote.
"You may revoke your vote at any time before the vote is taken at the special meeting," the document said.
Ray T. Chevedden, 93, of Los Angeles, a retired aeronautical engineer, owns 207 shares of Maytag stock and said
he's already voted against the Triton offer.
"The stock has gone way down, so I'll take the lesser loss," he said. "Whatever deal I get, it looks like I'll just be bought
out. I won't have any say about the rest of it. I'll just have a loss and forget it."
Maytag shares have fallen to $16.92 from almost $75 in May 1999, a level they quadrupled to over a five-year period.
Nick Rossi, a 43-year-old Boonville, Calif., hardware-store owner also has voted against the Triton deal.
"I thought I was getting bought out way too cheap," he said.
Rossi, who has owned 800 shares of Maytag stock since the 1980s, said he favors the Whirlpool deal because it's
financially superior and gives him stock in Whirlpool, which would allow him to keep ownership in the appliance industry.
"I think the appliance business is a good, steady, strong business," he said. "But what I'm going to do is, when hopefully
if Whirlpool gets the offer, I'm going to buy more Whirlpool."
If Triton's offer is declined by a majority of shareholders, Whirlpool can "submit to the Maytag board a proposal to
acquire the company," the document said. The Maytag board continues to endorse the Triton bid.
Benton Harbor, Mich.-based Whirlpool also informed Maytag on Tuesday that Whirlpool's top 20 trade customers
support the purchase of Maytag and the balance did not indicate opposition.
Whirlpool said one of the top four major appliance retailers has written a letter of support and two have indicated they
are not opposed to the deal, but have corporate policies against such letters.
The fourth has a policy of not commenting on pending mergers, Whirlpool officials said.
In trading on the New York Stock Exchange Tuesday, Maytag shares rose 3 cents to close at $16.93. Whirlpool shares
fell $1.04, or 1.3 percent, to close at $78.70.
Opinions differ on which offer would be best for Maytag, which has seen profits and market share in some appliances
slip in recent years. The company was dropped last year as a supplier to Best Buy, which gave space instead to
South Korean manufacturer LG Electronics.
Industry analyst Laura Champine, with Memphis, Tenn.-based Morgan Keegan & Co., has said Whirlpool, which is
at near-capacity in its U.S. plants, could ramp up production at some Maytag factories as it strives to capture more
market share in the competitive industry.
Union officials with the United Auto Workers Local 997, which represents assembly workers at Maytag's flagship
factory in Newton, said they support the Triton offer because they believe it's their best chance at maintaining local jobs.
Don Deppe, 61, who has owned Don's Town and Country Appliance, a Maytag retailer in Newton since 1972, said he
believes the Triton offer would be better because the local factory and corporate headquarters would be more likely
to continue to operate.
"It won't be as good as it is now, but they would at least attempt to keep it here for a while," he said.
He believes Whirlpool would just absorb Maytag and likely close the corporate headquarters if not the factory.
Maytag, ready for buyout, posts profit
By Padraic Cassidy, MarketWatch
Last Update: 4:11 PM ET July 22, 2005
NEW YORK (MarketWatch) - Maytag Corp., the struggling appliance maker at the center of a takeover battle, said Friday it turned a profit
in the second quarter, though the results missed analysts' expectations. Late Thursday, Maytag said its board continued to recommend
a $1.1 billion takeover offer from Ripplewood Holdings, rebuffing a higher bid from Whirlpool Corp.
Maytag Corp. Friday reported second-quarter earnings of $3.5 million, or 4 cents a share, compared with a loss of $41.1 million, or 52 cents
a share, a year earlier. Excluding one-time restructuring charges, earnings were 7 cents a share, missing the average analysts' estimate
compiled by Thomson First Call of 10 cents a share. The shares rose 55 cents to $16.20 in trading Friday.
The appliance maker said rising raw materials costs for steel and resin, lower floor care pricing and higher fuel and transportation costs
offset sales growth and improved mix and cost savings. Revenue rose 6.7% to $1.23 billion from last year's $1.15 billion, topping analyst
forecasts of $1.15 billion. A 7.9% increase in home appliance sales - in refrigeration, laundry, cooking, dishwashing and floor care - helped
offset an 11% decline in commercial products sales.
Aggressive sales into Maytag's distribution channels appears to have driven the higher performance, with accounts receivable rising
$88 million, said Prudential analyst Nicholas Heymann.
The Newton, Iowa, company affirmed its outlook for 2005 earnings in the range of 45 to 55 cents a share, including about 10 cents a share
in restructuring charges.
It also said its board was unable to determine if Whirlpool's $17-a-share bid "may reasonably be expected to lead
to a financially superior transaction that is reasonably capable of being completed."
It will continue to evaluate the proposal, however, from its Benton Harbor, Mich., competitor. Ripplewood, a group of private equity backers, is
bidding $14 a share and Maytag has set a vote on the offer for Aug. 19.See full story.
Earlier this week a group led by Qingdao Haier, China's largest appliance maker, pulled its $16 a share offer for Maytag.
"While there's uncertainty of our future ownership, we remain focused on running a better business," said Maytag Chief Executive Officer
ralph Hake. "Over the next few months we expect to finalize our operational plans to migrate viable product lines to low-cost
manufacturing locations."
Haier Drops Maytag Bid, Leaving Whirlpool, Ripplewood
July 19 (Bloomberg) -- 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 Enters the Fray with $17/share bid.
July 18, 2005
THREE MONTHS AGO, MAYTAG) was lonelier than its famous repairman, the latest American business icon seemingly done in by
soaring costs and fierce competition. Bankruptcy jitters pushed its share price below $10 in early May.
But that was before investors figured out that Maytag's brand, factories and distribution system might be worth more under new
management. Now the company is the object of a bidding war involving three private capital groups and a leading Chinese
manufacturer, in addition to its chief top U.S. competitor.
On Sunday, appliance maker Whirlpool offered to acquire Maytag for $17 a share, made up of equal measures of cash and stock.
Maytag's $969 million in debt boosted the offer's value to $2.3 billion. On Monday, Maytag shares jumped 13% to $17.48.
Whirlpool's bid is 10% above Friday's close and 21% higher than the $14 a share in cash offered by Triton, a private-equity consortium
led by Ripplewood Holdings. Maytag shareholders had been expected to vote on the Triton bid on Aug. 19.
Maytag has also received a preliminary proposal of $16 a share from the Chinese appliance maker Qingdao Haier, in a partnership with
private-equity funds Blackstone Group and Bain Capital. That group expected to complete its due diligence in the next few weeks.
"It sure does look like there will be a bidding war," says Laura Champine, an analyst at Morgan Keegan & Co., a Memphis,
Tenn.-based investment bank. "The primary obstacle here is regulatory and Whirlpool makes a compelling case that this is a
competitive industry globally and will remain competitive."
The outcome of any antitrust review may hinge on the treatment of Kenmore goods made by Whirlpool on behalf of Sears. Counting
Kenmore, the combined company would control nearly half of the U.S. market for major appliances. "Without Kenmore, it's less
than a third," notes Champine.
"We are confident we will gain antitrust approval," said Jeff Fettig, Whirlpool's chairman, president and chief executive, during
Monday's conference call. "We are ready to commence due diligence immediately." Maytag said it would consider Whirlpool's
proposal, though for now it's sticking to its recommendation in favor of the Ripplewood-led deal.
Maytag shares fell to a 14-year low in April after first-quarter profits plummeted 80%. The company blamed the rising costs of
energy, raw materials and distribution, as well as weaker demand for its Amana refrigerators. Its Hoover vacuum cleaner line has
been a consistent disappointment.
Key retail chains gave Maytag the cold shoulder. Best Buy stopped selling its washers and refrigerators, while Home Depot introduced
appliances from South Korea's LG Electronics.
Whirlpool has done considerably better of late. "Whirlpool is running a nearly optimum capacity, somewhere between 80% to 90%,"
says Morgan Keegan's Champine. "I think buying [Maytag's] factory plays a key role in the deal. If you look at who needs the
capacity, it's Whirlpool as they service Sears Roebuck. Sears is converting 400 Kmart locations over the next three year, while
Haier is having trouble with its own factories."
Whirlpool also has a relationship with the union representing Maytag workers. According to Champine, it may be willing to spare
more jobs than the other bidders.
In announcing its bid for Maytag, Whirlpool reiterated 2005 earnings guidance of $5.90 to $6.10 a share, with cash from operating
activities of approximately $860 million, and free cash flow in the range of $250 million to $300 million. "We believe that the
opportunity for investment at another company is a way for more efficient returns and an enterprise asset utilization opportunity,"
said Whirlpool CEO Fettig. "So, from a macro sense those are two areas where there will be great benefits." Whirlpool shares
rose nearly 5% to $73.31 Monday, finishing just below June's one-year closing high.
Quote:
"The political framework is in Whirlpool's favor because the next highest bid includes China's largest major appliance manufacturer,"
says Champine. "There may be a bidding war, but it's almost too late for investors to buy Maytag shares. It's a very speculative bet.
However, they should buy shares of Whirlpool. It's an industry leader with a global footprint that in my opinion will see the benefits
of raw material costs, such as steel, declining over the next 12 months."
Champine doesn't own shares of Maytag or Whirlpool; Morgan Keegan & Co. doesn't have an investment-banking relationship
with the company.
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US CREDIT - More unknowns as buyers circle Maytag
Fri Jul 15, 2005 03:54 PM ET
NEW YORK, July 15 (Reuters) - Maytag Corp.'s credit spreads have narrowed in recent months on hopes that new owners might get the
struggling company back on its feet, but analysts say it is probably not a good time to buy Maytag's bonds.
Uncertainty about who Maytag's ultimate owners will be and how much debt will be added to pay for a purchase means credit investors
should probably take a wait-and-see stance for now, strategists say.
Maytag shareholders are set to vote Aug. 19 on a $1.13 billion takeover offer from an investor group led by Ripplewood Holdings. A rival
buyout consortium has also expressed interest in bidding.
The final winner matters to credit investors because it will make a difference in Maytag's balance sheet and credit ratings, now at the upper
range of junk status.
Analysts expect a Ripplewood purchase would raise leverage at Maytag dramatically, likely driving its ratings into the "single-B" area
from "double-B."
Last month, China's largest appliance maker, Haier Group, and two private equity firms expressed interest in buying Maytag for $1.28 billion.
No formal bid is on the table, but that group would also likely add leverage to Maytag's balance sheet, triggering multiple downgrades,
strategists said.
For bondholders, the best potential outcome would be an offer from a higher-rated appliance maker, a possibility that has not been ruled out.
"The Maytag name, at the end of the day, is worth something," said Thomas Eggenschwiler, co-head of fixed-income research at Aladdin
Capital in Stamford, Connecticut. Foreign companies, for example, might see Maytag's distribution channels as a good way to gain entry
to the U.S. market.
That means Maytag's bonds could rally or fall more, depending on the eventual owner.
Maytag's bond prices have improved a touch since the buyout offer from Ripplewood. Its 5 percent notes due 2015 last traded at 80 cents
on the dollar on Thursday, up from 79 cents on May 20, when Ripplewood's offer was announced.
The cost of insuring Maytag's debt against default for five years has declined to 417 basis points, or $417,000 for every $10 million protection,
from 432 basis points on May 20.
Generally bullish sentiment in the credit default swap market may be helping Maytag's spreads, a CDS strategist said.
The improvement may also reflect hopes that any new owner will be a shot in the arm for Maytag, helping reverse a painful slide in market
share, other analysts said. Either Ripplewood or the Haier Group is expected to move Maytag's production offshore to trim labor costs and
help the company fend off foreign competitors.
"We think any potential deal on the table or proposed deal would be beneficial to short-term bonds, because it increases the likelihood you
would receive full value at maturity," said Craig Hutson, analyst for fixed-income research service CreditSights.
With the longer-term outlook more uncertain, Hutson said he would not recommend buying Maytag's longer-maturity bonds.
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Maytag proxy urges a 'yes' vote to Ripplewood buyout
Friday July 15, 4:08 pm ET
By Padraic Cassidy
NEW YORK (MarketWatch) - Maytag Corp. filed a notice to shareholders late Friday urging them to vote for the $14 a share, $1.1 billion
cash buyout offer from Ripplewood Holdings, a group of private equity funds sponsored by Goldman, Sachs & Co. , J. Rothschild Group Ltd.
and RHJ International. The proxy also officially set a meeting date of Aug. 19 in Maytag's hometown of Newton, Iowa for the vote. Maytag
also said it told competing bidders, led by Bain Capital, Blackstone Group and China's appliance maker Haier America it would furnish all
the same information to them as it had to Ripplewood so that Haier could "formulate a definitive proposal." Maytag shares ended Friday
trading down 9 cents to $15.45, below the Haier group's $16 a share preliminary offer.
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Maytag Says FTC Approves of Buyout Offer
NEWTON, Iowa (AP) - Maytag Corp. said Wednesday it has received Federal Trade Commission approval for the appliance maker's
proposed acquisition by an investor group led by Ripplewood Holdings LLC.
Earlier in May, the home and commercial appliance company agreed to be acquired by Triton Acquisition Holding Co., an entity organized
by the Ripplewood investor group, for $14 a share, in a deal valued at about $1.13 billion.
That transaction remains subject to the receipt of debt financing by Triton Acquisition Co., stockholder approval and other customary closing
conditions. Maytag has scheduled a special meeting of stockholders for Aug. 19 to vote on the adoption of the merger agreement. Stockholders
of record of Maytag as of July 20, will be entitled to vote on the transaction. Maytag said it plans to mail definitive proxy material to its
stockholders on or about July 20.
In June, China's Haier Electronics Group and U.S. private equity groups Bain Capital Inc. and Blackstone Group made a rival bid, offering
to buy Newton-based Maytag for $16 a share, and raising concerns that the Ripplewood deal could be jeopardized.
---------------------------
Comment: "Last year, Haier had $12 billion in revenue and 30 overseas factories, including a refrigerator factory in its own industrial park in
Camden, S.C., according to the company's Web site. The company, which has about 50,000 employees, is also a favorite of the Beijing
government. In 1997, the government named Haier one of six companies it hoped to transform into one of the world's top
500 companies by 2010."
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From China, a New Bid for Maytag and Status
SHANGHAI, June 21 - The move by the Haier Group, a Chinese manufacturing colossus, to acquire the Maytag Corporation could
transform Haier into one of the world's most powerful appliance makers and give the company a greater foothold in America and Europe.
In addition, analysts say, the purchase would be another big step in China's transition to capitalism.
A consortium of investors led by Haier, China's biggest appliance company, offered about $1.3 billion for Maytag, the troubled home
appliance maker.
The bid, announced by Maytag officials late Monday, comes a month after the company agreed to be acquired by another investor group,
led by Ripplewood Holdings of New York, for $1.13 billion. The move by Haier and a group of investors that includes the Blackstone Group
and Bain Capital could touch off a fierce battle for Maytag.
The takeover bid also comes as the Chinese government is pushing big companies here to make bold overseas acquisitions in the hope of
turning them into multinational corporations with global brands.
For instance, the Lenovo Group's purchase of I.B.M.'s personal computer division closed just last month. The acquisition, for $1.75
billion, was one of the largest by a Chinese company of a foreign entity so far.
And CNOOC, the Chinese offshore oil and gas producer, will consider making an $18 billion bid for Unocal at a board meeting
Wednesday. Unocal agreed in April to be acquired by Chevron for $16.4 billion, and a bid from CNOOC might ignite a takeover war.
"Chinese companies are growing bigger, and their managers have such great ambitions that they want to take a big step and jump to the
next level," said Hu Zuohao, a professor of marketing at Tsinghua University in Beijing. "They're no longer satisfied with the domestic
market."
A takeover of Maytag, the third-biggest American appliance maker behind Whirlpool and G.E., would unite an American household
name with a rising power in the world of washing machines, refrigerators, dishwashers and oven ranges.
But such an acquisition would not be without challenges: the companies sought by Chinese corporations tend to have well-known brand
names that are slipping into decline, like Maytag. The maker of Hoover vacuum cleaners, Amana appliances and Magic Chef ovens,
Maytag is entertaining takeover bids as it struggles with higher costs and lower profit in recent years.
Representatives of Maytag, based in Newton, Iowa, were not immediately available for comment Tuesday. A spokesman for Haier,
based in the northeastern Chinese city of Qingdao, declined to comment.
In 1999, Maytag's stock hovered around $70 a share on strong profit. On Tuesday, Maytag traded at $16.06 a share, and that price
reflects sharp recent gains on takeover speculation.
Maytag, which has more than 20,000 employees and had sales of about $4.7 billion last year, is still one of the world's biggest appliance
makers, after Electrolux, based in Sweden, Whirlpool and G.E.
Haier is also a consumer goods goliath. The company is still largely government-owned, but has a publicly listed division. It has branched
out in recent years to computers, home furnishing and cellphones.
Last year, Haier had $12 billion in revenue and 30 overseas factories, including a refrigerator factory in its own industrial park in
Camden, S.C., according to the company's Web site.
The company, which has about 50,000 employees, is also a favorite of the Beijing government. In 1997, the government named Haier
one of six companies it hoped to transform into one of the world's top 500 companies by 2010.
Its longtime chief executive, Zhang Ruimin, has even fashioned himself as a Chinese version of John F. Welch Jr., the hard-driving former
chief of G.E. Mr. Zhang is the first businessman named to the Communist Party's elite ruling committee, the Central Committee.
While Haier's ownership structure and finances are opaque, its status as one of China's few brand-name companies is clear. The
air-conditioners, refrigerators and other goods it makes are in millions of homes here.
Haier's profit margins, however, have recently thinned in some areas, analysts say.
If its takeover bid succeeds, Haier could face big challenges in combining its operations with those of the struggling Maytag, whose
first-quarter earnings fell 80 percent, to $7.7 million.
"The companies that are sold to Chinese buyers are usually those who have been in financial trouble for a long period, meaning the
managers in their own countries can't fix the problems," Mr. Hu at Tsinghua University said. "At this point, Chinese managers might
not be experienced enough to tackle these kinds of problems."
For its part, Maytag shareholders face a new decision, after the company agreed last week to be acquired by Ripplewood for $14
a share. Late Monday, Maytag said in a news release that a group led by Haier had offered shareholders $16 a share.
In the statement, Maytag's lead director, Howard Clark, said: "We continue to support the Ripplewood transaction; however, we
also believe that it is incumbent on us to pursue this possibility of achieving a higher price for our stockholders."
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ANALYSIS: Haier will not allow chance to acquire Maytag slip away, analysts say
Shanghai. June 16. INTERFAX-CHINA - Not only would an acquisition of New York-listed Maytag give Haier a strong foot hold in the U.S.
and a valuable brand name, but would also allow China's largest home appliances manufacture to list assets on the American capital
markets. For these reasons, analysts surveyed by Interfax believed it was unlikely that Hair would allow the chance to acquire Maytag to
slip away.
Haier officials have so far declined to comment on reports that the company is evaluating the possibility of acquiring Maytag, the third largest
white goods maker in the U.S. The company did, however, issue a statement saying that Haier Group has shown interest in the Maytag
acquisition issue, but that the company has to date made not decisions on any transactions.
Meanwhile, Chinese newspaper International Finance News reported that Haier was now evaluating Maytag's operations, including finance,
marketing, distribution, and brand, citing an unnamed source with Haier's Overseas Business Department. The official was also reported as
saying that Haier was looking to acquire an overseas company with a good distribution network and other resources, in addition to having a
good brand name. The Shandong Provincial Government and local banks are also participating in preparation work for a possible acquisition,
the paper said.
Maytag announced on May 19 that it had agreed to an acquisition by an investor group led by Ripplewood Holdings for USD 2.1 bln. However,
it has been widely reported that some of Maytag's major investors will move to block this acquisition agreement, which would provide an
opening for other companies, such as Haier, to make an offer for the U.S. appliances maker. In addition to Haier, Brandes Investment
Partners & Co. and Blackstone have also been named as companies interested in a potential acquisition of Maytag. Haier, however, might
be the only company that would continue the business operations of Maytag after an acquisition.
Maytag acquisition would strengthen Haier's international business and accomplish a U.S. listing
The Maytag assets that Haier wants most to get its hands on are the U.S. firm's distribution channels in North America and Europe, and the
Maytag brand name, analysts said. Although Haier has already entered markets in both North America and Europe, the Chinese firm has
found only minimal success in these regions. One major disadvantage that the company has had is in marketing. Haier entered North
America and Europe leveraging the company's price advantages, but has subsequently also been pigeonholed as a cheap low-end brand.
The acquisition of Maytag would help the Chinese firm to make a major move into higher-end markets.
"Haier has a presence in the U.S. and Europe but has been hampered by the company's branding problem," Wang Tao, an analyst with
Chinese consultancy Analysys International, said. "The long term goal of an acquisition of Maytag would be to improve the brand recognition
of Haier worldwide."
Haier's international business, moreover, will also begin to grow in importance as the domestic Chinese market becomes more and more
competitive, Liu Buchen, Principal Analyst for Guangzhou Shangbing Fa Mou Consulting, said. Growth on the Chinese appliances market
has slowed over the last few years as more players have entered the market, driving up competition. As a result, Haier will likely find more
growth opportunities in the short run in foreign markets than the company will find in Mainland China, Liu said. At present, roughly half of
all home appliances produced in China are for export.
"Haier has not performed so well on international markets, although the company started early and put huge amounts of money in these
markets," Liu said. "If the domestic market and the overseas markets represented two legs for Haier, then one of Haier's legs is much
shorter than the other."
"The acquisition of Haier should help the company improve its business overseas, and will also help improve Haier's technologies," Liu said.
Although analysts agreed that Haier's long-term goals for acquiring Maytag would be to expand and improve its international business, the
Chinese appliance makers short term goal for the acquisition might be to list some of its assets on the New York Stock Exchange. By
acquiring Maytag, Haier would have control of a perfect listing vehicle and would then have access to the world's largest capital market,
Wang said.
"Haier has wanted to publicly listed in the U.S. An acquisition of Maytag would be a perfect opportunity for accomplishing just that,"
Wang said.
Maytag will not come cheap
The USD 2.1 bln bid made by Ripplewood Holdings for Maytag does not rule out a third party entering the fray to eventually complete an
acquisition deal for the U.S. appliance maker. However, interest from several different bidders, including Brandes Investment Partner and
Blackstone, will likely increase the price at which control of Maytag is eventually transferred, Wang said.
Lu Renbo, Deputy Director of the Market Economy Research Institute under the State Council Development Research Center, agreed that
the more suitors that vie for control of Maytag, the higher the eventual price would be driven. In turn, the higher the cost of acquisition is
driven, the greater the risk will be for Haier. The Chinese firm's mobile phone business, which is listed on the Hong Kong exchange as Haier
Electronics, generated USD 405 mln in turnover and net profit of USD 55 mln for the whole of 2004. Haier's refrigerator and air conditioner
businesses, publicly listed on the Shanghai Stock Exchange as Qingdao Haier, generated revenues of USD 1.85 bln and net profit of
USD 44.6 mln last year.
"Haier will have to pay a huge amount of money to get this deal done, which is an obvious risk that the company will have to watch," Lu said.
Despite the expected high cost of acquiring Maytag, however, Lu, Liu, and Wang all believed Haier would eventually work out a deal for
control of the U.S. appliance maker.
"Haier will not easily give up this chance to acquire Maytag," Wang said.
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Maytag Could Owe $40 Million to Investor Group if Proposed Deal to Be
Taken Private Falls Apart
WASHINGTON (AP) -- Maytag Corp. said Monday it could owe $40 million to an investor group led
by Ripplewood
Holdings LLC if its proposed deal to be taken private by the group falls apart.
Maytag said in a regulatory filing that unless theres a breach of the merger agreement, either party
can walk away from the deal if it isnt completed by Dec. 15.
The investor group includes J. Rothschild Group, RHJ International and GS Capital Partners.
Ripplewood is expected to accelerate foreign production of Maytags well-known brands such as
Maytag, Hoover, Jenn-Air and Amana.
Shares of Maytag rose 99 cents, or 6.9 percent, to close Monday at $15.39 on the New York Stock
Exchange.
The above-offer stock price implies that some investors believe another bidder will emerge or that
Ripplewood will have to sweeten its price to win shareholder approval of the deal.
Maytag disclosed the bid only after its board had accepted it.
A few large stakeholders said they intend to vote against Ripplewoods offer, should it prove to be
the only one on the table.
"We think something with a 2 in front of it certainly is justified by our math," said John Goetz, co-chief
investment officer at Pzena Investment Management LLC, a New York investment adviser that at last
report owned more than 1.1 million Maytag shares. Goetz said the firm would hold out for a higher price.
Ironwood Capital Management LLC president Warren Isabelle, whose Boston company owns more
than 356,000 Maytag shares, said the would-be buyout group is "definitely low-balling the bid,"
adding, "at $14 I would vote against it." Isabelle said the Maytag name is a valuable brand.
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Under the agreement with Ripplewood, Maytag now has a 30-day window to negotiate with
other suitors, a source said.
The Newton, Iowa-based company is expected to draw interest from other financial buyers as well as
other appliance manufacturers, primarily foreign companies.
Tim Collins, chief executive at Ripplewood, said he "wasn't worried" about another bid emerging for
Maytag. He declined to say if his firm would consider bumping up its offer. Ripplewood, which has
about $4 billion under management, began considering a run at Maytag in early 2004, he added.
A Maytag representative declined to discuss the matter. "At this point in time, this is the only offer
on the table," spokesman John Daggett said of Ripplewood's bid. "If and when other offers come,
the board will consider them." Fellow private equity firms might find Maytag cheap at $14 a share,
for the shares traded at twice that a year ago. Over that same period, the stock of rival Whirlpool
Corp. has been flat.
Ripplewood's bid values Maytag at less than 0.5 times its annual sales and about 7.4 times EBITDA.
However, the EBITDA multiple is misleading because high raw material and distribution costs and
an ill-advised price war with other large appliance makers cut deeply into income and cash flow, as
did a legal fight with a rival.
Longbow Research analyst David MacGregor called Ripplewood's bid "relatively light." MacGregor
forecasts EBITDA of $284 million this year, but says that if Maytag can restore its operating margin
to 7% which it achieved earlier in the decade and comparable to competitors' margins cash flow
would be more like $500 million. At that cashflow level, Ripplewood's offer equates to a modest
enterprise value/EBITDA multiple of 5.5 times.
As the third-largest maker of major appliances in the U.S, Maytag isn't expected to draw interest from
either of its bigger U.S.-based rivals, Whirlpool or General Electric Co., because of antitrust
complications. But with a 17% share of the U.S. market by unit volume, it would be attractive to a
foreign company, Longbow's MacGregor says.
One bidder could be Sweden's AB Electrolux, whose product lines mirror Maytag's, including washing
machines, refrigerators and vacuum cleaners. In addition to Maytag's namesake appliances, it owns
vacuum maker Hoover. Maytag has $412 million in debt maturing in 2006, about 40% of its total debt.
It currently pays about $60 million a year in interest, although it has been trying to refinance.
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Maytag Agrees to Go Private in $1.13 Billion Cash Buyout; Shares Soar 25 %
DES MOINES, Iowa (AP) -- Maytag Corp. has agreed to be bought by a group of investors that would take the
well-known appliance maker private, away from Wall Street's sharp scrutiny.
The group, led by private equity firm Ripplewood Holdings LLC, announced after the markets closed 5/19/05 it is
offering $1.13 billion cash, or $14 per share, a 21 percent premium over Maytag's closing share price Thursday
on the New York Stock Exchange. The investors also will assume $975 million of company debt under the deal.
In a statement, Ripplewood founder and CEO Timothy C. Collins said the deal offers the group a "legendary company,
with a portfolio of world-class brands and a long history of producing high-quality, innovative products."
Analyst David MacGregor of Cleveland-based Longbow Research said a privatization may help the new owners
accomplish their goals of using Maytag as a platform to build a lower-cost global enterprise.
"These are the types of challenges that are very difficult to execute when you're living in a 90-day revolving time frame
such as is the case for publicly traded companies which must be accountable to Wall Street."
He said fixing some of Maytag's problems would likely take at least five years.
"You really need to just go away and straighten yourself out and turn yourself around and if they can build a global
model, then they can bring this company public again in five years. But it's a five year job make no mistake
about it," he said.
Maytag employs about 18,000 people.
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See below for two articles from this edition of the NSBC News -
East-Central Iowa's Regional Resource:
Newton - Altoona - Colfax - Baxter - Jasper County
THE GREAT GROWTH STORY: ALTOONA - The Next West Des Moines?!
The rapid growth happening on the west side of the Des Moines Metro is well documented.
What has not received the same coverage has been the similar growth scenario underway
all along the new Highway 65 bypass around the east side of the Metro. It appears history
may be repeating itself.
West Des Moines (WDM): The "Growth Engine" for the Western Suburbs
West Des Moines had a population of only 16,441 in 1970 and 21,849 in 1980. By 1990,
WDM had grown to an amazing 31,702 and ended 2000 with a population of 46,403! How
did this growth affect the other towns in the area?
Communities west of the Metro didnt start growing until after the dynamic growth in WDM was
firmly established. For example, Waukee was a town of only 2,512 in 1990 but had doubled by 2000.
Grimes nearly matched this growth (1990 - 2,653 / 2000 - 5,098). WDM was serving as a "growth engine"
for the rest of the area. It didnt happen overnight, but it did happen.
Lets look at Altoona.
Located only 20 minutes to the west of Newton, Altoona was a sleepy little town of 2,883 in 1970. By 1980,
growth had started to take hold as the community nearly doubled to 5,764 followed by a 1990 census of 7,191.
In 2000, the population had risen to 10,351 with estimates now showing 11,349 residents in 2003.
Just how fast is Altoona growing?
Let's compare Altoona's building permit statistics for 2004 with other areas of the Des Moines Metro.
First, lets look at residential (housing) permits.
Altoona: $31.7 million
Waukee: $31.4 million
Norwalk: $13.1 million
West Des Moines: $58 million
The story? Altoona surpassed Waukee (the fastest growing community in the state) and built more than half as
much housing as WDM - a community 4 times as large!
Now, lets look at commercial development. (permit values)
Altoona: $8.9 million
Waukee: $3.6 million
Norwalk: $2.6 million
Johnston: $4.1 million
Impressive numbers. (WDM is not included because of the distortion caused by the Jordan Creek Mall.)
With these kind of dollars flowing into Altoona (and Pleasant Hill and Bondurant), it is realistic to believe
that growth is literally just around the corner - it is only 22 miles from the Wrestling Museum to Adventureland.
Less than 20 minutes by Interstate 80. Altoona will, just as WDM has for Metro West, serve as the growth engine
for the area east of the Des Moines Metro (i.e. the Tourism Triangle - see article page 1).
Editorial Comment:
A great many residents of the Newton area are concerned, and rightly so, about the loss of local employment
and the impact that will have on our ability to grow. I share this concern but offer up a challenge. Try to name
an employer based in one of the towns west of WDM. Its difficult to do, isnt it? Thats because there is little
employment base outside of service industries. Their employment bases, or lack thereof, did not play a role
in the growth they have enjoyed. It has all been about the oldest adage in the world of real estate: Location,
Location, Location! We must try to keep that in mind during these stressful times.
I've got a "strong buy" recommendation on this area. To make money in the stock market, you need to have
the vision and optimism to buy when life and market forces conspire to roughen the waters. Life often mirrors this
plan. If the sound fundamentals are there and you buy for the long term, the rewards can be significant.
NEXT ISSUE: What can we do to recruit businesses and/or assist businesses that decide to locate
in our communities?
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THE TOURISM TRIANGLE: Newton, Altoona & Pella
www.tourismtriangle.com
Tourism has become one of the great growth industries of the early 21st Century. In partnership with our
neighbors to the west and south, an exciting opportunity is taking form.
The Tourism Triangle: Newton - Altoona - Pella.
Regionalism has become the new "Hot Button" for the Iowa Department of Economic Development (IDED).
Newton and the other points of the triangle - Altoona and Pella - are uniquely positioned to become leaders in
responding to this new emphasis.
Why should a community put money into tourism?
STABILITY Once built, tourism destinations simply do not pick up and move. No matter how much one loves
Disney World, there is not enough money to incent Disney to move from Orlando to the Midwest. The
Statue of Liberty will not soon be moving out of the New York City area. Closer to home, the powers that be
at Prairie Meadows dont concern themselves with tax policy in South Dakota. The community leaders in Pella
need not worry that Molengracht Plaza will soon be found in downtown Minneapolis. This is not to say that
local entities dont need to partner with developers to make projects economically feasible. But unlike
what we see happen to so many manufacturing operations around the country, once a tourism attraction is built,
the owners will not be tempted with offers from other communities and/or states or even countries to relocate
to save labor costs, property taxes or income taxes.
Misconception: Tourist attractions only lead to minimum wage jobs.
Many of the jobs directly produced by an attraction will be lower paying service industry jobs. But if tourism does
so little, then why has Las Vegas been the fastest growing metro area in the country for the last ten years?
Las Vegas was not even a real town when the first casino was built there. It's in the middle of a desert and is
brutally hot for much of the year. Sounds much like Iowa: no ocean, no mountains, no existing large metro area,
unpleasant climate for a good chunk of the year. But tourism worked there and can here.
Why East-Central Iowa?
Within the Tourism Triangle you will find:
-Prairie Meadows Racetrack and Casino:
-Adventureland Park
-International Wrestling Institute and Museum
-Neal Smith Wildlife Refuge
-Trainland USA
-Rock Creek Lake
-Lake Red Rock
-Chichaqua Valley Bike Trail
-Pella: Dutch heritage exhibits
-Valle Drive-In Theater
-8 golf courses
-Maytag Dairy Farms
-Jasper County Museum
Here's just a sampling of the annual events in the TRIANGLE:
Pella Tulip Festival
Buffalo Days @ Neal Smith
Baxter Fun Days
12 Days of Christmas, Newton Style
The proposed U.S. Motorsport Entertainment Complex will be a substantial addition to the mix but not necessary
to begin the process of coordinating efforts, projects and funding with the other members of the TRIANGLE.
The geography, demographics and community resources mesh perfectly. All areas of the TRIANGLE are within
a 30-minute drive of each other; all communities are served by a 4-lane highway corridor; all communities are
similar in size with excellent air and rail resources; two of the three are represented by the same State Senator.
Newton has Maytag, Iowa Telecom and the Dairy Farms.
Pella has Pella Manufacturing, Vermeer and the Dutch heritage.
Altoona has Prairie Meadows, Adventureland and the growing retail base.
The Tourism Triangle - East-Central Iowas 21st Century growth vehicle!
Dennis Combs
President/Owner
CBC Iowa/NetWork Realty
201 First Avenue West
Newton, IA 50208
(641) 792-1212
Licensed in Iowa
