X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
With the original buyout bidder for Maytag Corp. on Monday pocketing a break-up fee and turning the auction for the ailing icon over to Whirlpool Corp., the focus in the three-month saga shifted to how the combination of the two appliance makers would fare. At $2.7 billion, Whirlpool’s bid richly values Maytag, which has posted a scant $11 million in net income so far this year and, by its own admission, is at least two or three years away from getting back on track. Moreover, the deal itself faces a number of challenges before — and after — closing. For starters, antitrust officials expect to scrutinize the proposed combination and are likely to demand shedding some lines before signing off on the deal. Benton Harbor, Mich.-based Whirlpool is the largest appliance maker in the United States, while Maytag, of Newton, Iowa, is the third largest. The two companies together would create the largest appliance manufacturer in the world. Beyond the regulatory concerns, however, Whirlpool faces the daunting task of revitalizing the slumping Maytag brand. Although the company started making farm machinery, Maytag has turned out washing machines for about a century. Once synonymous with dependability, Maytag has been displaced on many showroom floors by sleeker, more fashionable appliances from overseas manufacturers. Over the past year, Best Buy Co. stopped carrying Maytag machines, and Home Depot Inc., which accounts for about 10 percent of Maytag total sales, started carrying competing products. Stemming market share losses will be a key concern for the combined company. Longbow Research analyst David MacGregor estimates that each percentage point of market share lost lops $200 million off the top line and $90 million of Ebitda. Yet, MacGregor cautions that sales will inevitably slip in the months following the closing of the deal, as retailers initially look for more stable suppliers as Whirlpool and Maytag work through their integration. He pencils out the decline in sales at about $600 million. Cost savings and sales growth would more than offset those losses, added MacGregor, who is bullish on the Whirlpool-Maytag union. As part of the combination, Whirlpool is expected to sell some of Maytag’s side brands, including vacuum cleaner maker Hoover and vending machine manufacturer Dixie-Narco. Maytag acquired both companies in the 1980s. Although the two business units generate about $800 million in annual revenue, MacGregor estimated they would sell for about $300 million. The companies signed a definitive merger agreement on Monday, and a vote by Maytag shareholders on Whirlpool’s $21 cash-and-stock offer is expected before the end of the year. If approved, the deal would close early next year. As part of the terms, Whirlpool would pay Maytag $120 million in an unusual “reverse break-up fee” that kicks in if regulators block the combination. Whirlpool said a failure was “unlikely.” Lawyers are divided in their view. The buyout group, led by Ripplewood Holdings LLC, won’t be going home empty-handed for its yearlong involvement with Maytag. Whirlpool paid it a $40 million break-up fee on Monday. Copyright �2005 TDD, LLC. All rights reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.