Takeover approved!
Whirlpool's $1.68 Billion Takeover of Maytag Approved
Bloomberg March 29 2006
Whirlpool Corp. can complete its $1.68 billion takeover of Maytag Corp., the U.S. Justice Department decided as it rejected concerns from its own lawyers that the combination might hurt competition.
The acquisition, approved without any required divestitures, will create the world's largest appliance maker. It was the first merger decision by Thomas O. Barnett since he won Senate confirmation on Feb. 10 to head the Justice Department's antitrust division.
``I'm stunned,'' said Mirko Mikelic, a senior portfolio analyst with Fifth Third Bank in Grand Rapids, Michigan, with $21 billion assets including Whirlpool bonds. ``I thought they would need to do at least something to appease the Justice Department.''
Shares of Maytag surged $4.73, or almost 28 percent, to $21.81 at 4 p.m. in composite trading on the New York Stock Exchange. Whirlpool rose $6.38, or 7.1 percent, to $95.95.
``The proposed transaction is not likely to reduce competition substantially,'' the Justice Department said in a statement. ``Large cost savings and other efficiencies that Whirlpool appears likely to achieve indicate that this transaction is not likely to harm consumer welfare.''
Government lawyers who investigated the combination had raised concerns that it would lead to higher prices for washing machines because Whirlpool and Maytag together control more than 70 percent of the U.S. market, said antitrust lawyers familiar with the matter who spoke on condition of anonymity because they were not authorized to discuss the transaction.
Foreign Competition
Whirlpool, argued that growing foreign competition from makers such as China-based Haier Group Corp., LG Corp. of South Korea and Sweden's Electrolux AB would constrain its ability to raise prices.
The Justice Department said in its statement today that it is convinced the combined company can't raise prices because of competition from General Electric Co. and Electrolux AB's Frigidaire line. It also noted that foreign-made products sold by such companies as LG and Samsung Electronics Co. Ltd. ``have quickly established themselves in recent years.''
The Justice Department also cited competition from Sears Holdings Corp.'s Kenmore brand, which is manufactured by Whirlpool.
Whirlpool said its production of the Kenmore brand shouldn't be counted as part of its share of the washing machine market because Sears sets prices and promotes its own appliances.
Fourth-Quarter Loss
Whirlpool, based in Benton Harbor, Michigan, outbid Ripplewood Holdings last year for Maytag, which reported a fourth-quarter loss of $75 million, or 93 cents a share. Maytag's loss widened from $14.1 million, or 18 cents a share, in the same quarter a year earlier.
Haier withdrew its preliminary bid of $16 a share for Newton, Iowa-based Maytag after Whirlpool bid $17. Whirlpool then raised its offer three times to $21 a share before Maytag's board agreed to the deal.