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By sweetening its bid for Maytag Corp., Whirlpool Corp. is setting up the antitrust battle of the year, say lawyers sizing up a bidding war for the struggling appliance maker. “Whirlpool’s in for a slugfest,” said Stephen M. Axinn of Axinn, Veltrop & Harkrider. “I can’t see the government doing anything other than a complete, thorough proctological review of this deal.” Few lawyers are willing to bet on the outcome of regulators’ examination of a Whirlpool purchase, but regardless of how the antitrust analysis plays out, a drawn-out review could be a competitor-eliminating coup for the Benton Harbor, Mich.-based company. The deal is certain to get a second request for information from regulators, a process that takes an average of six months — and longer if there are extensive competitive overlaps. In the case of two of the largest manufacturers of household appliances in the U.S., competitive overlaps are certain. Even if regulators ultimately block a deal, the extra time could further weaken flailing Newton, Iowa-based Maytag. In the meantime, Whirlpool could continue to grab market share and develop new products while Maytag would continue its probably fatal flow of red ink. By accepting Whirlpool’s sweetened $21 per share bid, Maytag officials would be “agreeing to sell the company or send it down the drain,” Axinn said. Maytag, has already suffered major hits after sales plummeted last year. One major buyer, Best Buy Co., took Maytag products off the sales floor. New York private equity firm Ripplewood Holdings LLC has so far stuck to its initial bid of $14 per share. Ripplewood’s offer is lower than Whirlpool’s, Axinn explained, but the lower price allows the consortium leeway to invest in research and development as well as to streamline the company. Even if Ripplewood were to sell the company after strengthening its bottom line, Maytag would pose a greater threat to Whirlpool than it does now. If Maytag chooses Whirlpool’s bid, however, Whirlpool would still have an opening to back out of the deal after its rival is mortally wounded. If the government demands any divestitures, Whirlpool’s draft agreement allows it to cancel the deal with only a $175 million breakup fee: an unusual $120 million premium in case antitrust regulators block the deal, another $40 million to cover the breakup fee Maytag would owe to Ripplewood and a $15 million retention bonus to senior Maytag executives to keep them around during the review process. Maytag “would be damaged goods at the end of 2006,” Axinn said, if the government insists on a divestiture and Whirlpool walks away. It is difficult to determine how the government will look at the deal since so much of the analysis is based on how the nation’s appliance makers set prices, antitrust lawyers in Washington said. If Whirlpool sets prices based on Maytag’s, then the antitrust review will probably prohibit the deal. The Federal Trade Commission, the likely federal agency to review the deal, will also look at what appliance retailers think of the merger. In this case, about 65 percent of the nation’s appliances are bought from manufacturers by only four retail chains: Sears, Roebuck and Co., Best Buy, Home Depot Inc. and Lowes Cos., according to Mark Schechter, a partner at Howrey, who is representing Whirlpool and spoke after the initial proposal. Schechter declined to comment on the status of the offer or Whirlpool’s chances of getting regulatory approval. But if the retailers are confident they can get good products at low prices, then regulators probably won’t see a problem with the merger. However, if the retailers say they need Maytag to remain independent, then regulators would probably try to force a divestiture in some product lines. How to best handle the bid is difficult for Maytag, according to corporate lawyers. If the company rejects Whirlpool’s higher bid, the possibility of shareholder suits is very high, they agreed. But accepting Whirlpool as a suitor means there’s a high risk of aggravation — and agitation — before the issues are folded up and put in the closet. Copyright �2005 TDD, LLC. All rights reserved.

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