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Maytag's planned purchase of Amana Appliances later this summer was a long time coming — 17 years to be exact.
According to Len Hadley, who stepped down last week as Maytag's interim president/CEO (see TWICE People, p. 6), the majap maker had considered amassing Amana on two previous occasions while the company was still a subsidiary of Raytheon Corp.
Hadley, who met with Amana employees earlier this month after the $325 million buyout was announced, told the local Cedar Rapids, Iowa Gazette that he was Maytag's acquisitions officer when he first tried to buy the company in 1984. But Raytheon, which acquired Amana Refrigeration from founder George Foerstner in 1965 to complement its Caloric and Speed Queen brands and to leverage its microwave cooking technology, wasn't interested.
All that changed in the mid-1990s when Raytheon decided to sell off its appliance unit, whetting Maytag's appetite once again. But possible antitrust concerns stemming from Amana's Speed Queen brand, and the inclusion of the company's commercial heating and air conditioning business as part of the package, forced Maytag to walk away empty handed. "It was packaged in a way that was impossible for us to deal with," he told The Gazette, adding in hindsight that Maytag wouldn't have been up to the deal anyway due to "internal issues" at the time.
Instead, Amana went to Houston-based Goodman Global Holding Company, a privately held commercial heating and air conditioning concern, for $750 million in 1997. But despite a $100 million infusion, the rationalization of its businesses and the recruitment of former Rubbermaid executive Chuck Carroll as CEO, Amana continued to shed market share and earnings.
Hadley said family-owned Goodman approached him early this year about an Amana divestiture. This time, the deal was structured to include "exactly what we would have cherry picked from Raytheon four years ago," he noted.
The price tag includes Amana's refrigeration, laundry, cooking, room air conditioning and commercial microwave oven businesses, and three attendant factories. Goodman will retain the Amana-branded HVAC products division, and will pay Maytag a licensing fee for use of the name.
During a conference call with analysts, Hadley said that while the deal comes at a time of "continued industry weakness and economic softness," it supports the company's premium brand focus in white goods. It also plugs a microwave oven hole in Maytag's product line, and could help the company sop up excess capacity by producing Amana's top mount refrigerators, which are currently outsourced to Frigidaire. Conversely, Amana plants could now supplant Fedders in supplying Maytag with branded room air conditioners, as it has for the past year.
Hadley also cited the companies' similar corporate cultures, shared Iowa heritage and geographic proximity.
Hadley declined to discuss details of its planned integration of the two businesses, noting that the companies remain competitors until the transaction is completed. He acknowledged, however, that there will be duplication in administrative and functional support, and that Maytag would be blending the best strengths of both. He noted that an integration team has been assembled and given a specific time frame in which to accomplish its task.
Echoed Bill Beer, president of Maytag's majap division, "We expect to gain the maximum efficiency possible through the acquisition, and that will require making decisions around duplication in some business functions and activities."
That leaves unclear the fate of Amana's Carroll. In a written statement, Carroll said the company is proud of its accomplishments in building its brand, customer base and new product lines over the past three years, and that the merger presents "unique opportunities to combine best practices and talent across the two organizations."
At least for the short term, both Carroll and Beer will report to Ralph Hake, who was named chairman and CEO last week. Hadley, who came out of retirement after Lloyd Ward was ousted last November, will stay on as a director and help with the transition through year's end.
Also uncertain are Maytag's plans for Amana's commercial microwave oven operation. Maytag announced last month its plans to divest its foodservice equipment businesses to better focus on its premium branded major appliance lines.
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