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After agreeing three months ago to a scratch-and-dent sale to a buyout firm, the board of directors at Maytag Corp. flip-flopped Friday backing an offer from rival Whirlpool Corp., which has sweetened its bid three times to a top-dollar takeout valued at $2.7 billion. According to terms, Benton Harbor, Mich.-based Whirlpool will pay $1.7 billion in equal amounts of cash and stock for Maytag, as well as assuming $977 million of Maytag’s debt. Whirlpool made its latest offer on August 10, unexpectedly raising its bid to $21 for each Maytag share from $20 each. In after-hours trading on Friday, Maytag stock added 59 cents to $19.60. “We welcome the determination by the Maytag board of directors that ours is a superior proposal and look forward to the signing of a definitive agreement with Maytag,” Whirlpool chief executive Jeff M. Fettig said in a release. The board of Newton, Iowa-based Maytag said it would be “inconsistent with … its fiduciary duty” to support the lower — but relatively straightforward — offer from the consortium headed by Ripplewood Holdings LLC. Ripplewood offered $14 in cash for each Maytag share in mid-May, a bid initially endorsed by Maytag’s board. Maytag’s board plans to formally scrap that agreement within five days, unless Ripplewood sweetens its offer. Similarly, a shareholder vote planned for next Friday on Ripplewood’s offer has been canceled, replaced by a meeting on Whirlpool’s proposal slated for August 30. Having not budged from its initial offer in three months, Ripplewood is not expected to bump up its bid in the eleventh hour. The New York City private equity firm, which began discussing a deal with Maytag more than a year ago, stands to pocket a $40 million break-up fee. Earlier Friday, proxy service firm Institutional Shareholder Services also lined up behind Whirlpool bid for Maytag. Whirlpool can afford to pay more for its smaller rival because of hundreds of million of dollars in expected cost savings, on everything from raw materials to manufacturing to advertising. The combination of Whirlpool and Maytag — the No. 1 and No. 3 U.S. appliance makers, respectively — is expected to draw close regulatory scrutiny. The merged company, with almost $19 billion in annual revenue, will sell appliances for nearly every household duty, from Hoover vacuum cleaners to Whirlpool washing machines to Amana kitchen stoves. Beyond regulatory challenges, Whirlpool will have its hands full trying to resuscitate a well-known American brand that looked headed for the scrap-heap. Maytag’s debt is currently rated “junk” status and operating income has plummeted to $40 million last year from $360 million in 2002. Maytag executives acknowledge that the company is two or three years away from a recovery. Following a disastrous first quarter this year, in which it earned just $3.5 million, several analysts warned Maytag could be headed into Chapter 11. Shortly after that, Ripplewood made its initial offer. Copyright �2005 TDD, LLC. All rights reserved.

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