By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Maytag is preparing its employees for an inevitable downsizing should it ultimately merge with Whirlpool next year.
The two appliance giants entered into a definitive agreement last month that has Whirlpool acquiring Maytag for $2.7 billion in cash, stock and assumed debt.
Whirlpool's offer of $21 per share was twice that of Ripplewood Holdings, the other bidder, said Maytag's CEO/chairman Ralph Hake, and his company is now preparing to obtain regulatory approval of the merger. If all goes according to plan, a shareholder vote would be held in the fourth quarter, and, following federal consent, the deal could finalized by the first quarter of 2006.
Antitrust concerns will be weighed by either the Federal Trade Commission or the Department of Justice, as attorneys from both federal agencies begin wrangling over jurisdiction.
In an open letter to Maytag's employees, Hake addressed the issue of layoffs, which he said would likely take place, but he could not discuss numbers at this early juncture.
“Understandably, I realize that many of you want to know how a possible merger with Whirlpool may impact your job. However, it's far too early to talk about how any given department or individual job may be affected. I do recognize that in any combination like this, where duplicate positions may exist, it is reasonable to expect that some jobs will be eliminated,” he said.
Hake said that during the integration process personnel from both companies will be looked at to fill open or overlapping positions.
Hake implored his employees to keep working hard and not allow the stresses of the acquisition to be a distraction.
“We need to continue to do our jobs — selling, distributing, manufacturing and developing our products. Each of us should continue to come to work every day with a strong commitment to do our jobs to the best of our abilities with pride in our accomplishments,” he said.
Hake's letter followed word that some 200 workers will be let go from Maytag's flagship laundry plant here this month, as market demand shifts to washer and dryer models made at other company facilities.
The merger's announcement came on the same day that Ripplewood allowed its $1.12 billion offer for Maytag to expire, leaving Whirlpool as the lone bidder. As part of its agreement with Ripplewood, Maytag paid a $40 million termination fee to that firm — which was reimbursed by Whirlpool — and formally terminated that contract.
By allowing its agreement with Maytag to lapse, Ripplewood, which made the bid through its subsidiary Triton Holdings, essentially refused to top Whirlpool's offer. For the deal between Whirlpool and Maytag to be finalized it must still receive shareholder approval in a vote that will likely be set for the fourth quarter, and pass muster with federal regulatory authorities. But if the two do join forces, which they project will happen by the first quarter of 2006, they will form the world's largest major appliances firm.
In a written statement, Howard Clark, Maytag's lead director, said, “After careful consideration in conjunction with our financial and legal advisors and an independent committee of Maytag's board consisting of all non-management directors, we re-evaluated the transaction with Triton and concluded that the Whirlpool agreement is superior and is in the best interest of our shareholders.”
Jeff Fettig, Whirlpool chairman, president and CEO, commented that “The combination of Whirlpool and Maytag will create very substantial benefits for consumers, trade customers and our shareholders. This transaction will enable us to achieve significant efficiencies and better asset utilization. It will also allow us to offer a wider range of products to a much broader consumer base.”
“Overall, this transaction will translate into better products, quality and service, as well as efficiencies, which will enhance our ability to succeed in the increasingly competitive global home-appliance industry,” Fettig continued. “We remain highly confident that we will receive regulatory clearance for this transaction in a timely manner.”
Added Hake: “This combination brings together two leading organizations with strong traditions in quality and customer satisfaction. Together, Whirlpool and Maytag will bring substantial benefits to consumers around the world, as well as to shareholders and customers.”
Last month's action capped a soap opera-like process that started in May when Ripplewood tendered its initial offer of $1.12 billion. Haier joined the fray in June upping the ante to $1.28 billion angering Ripplewood. In July Whirlpool came into the picture on July 18 throwing out an unsolicited $17 per share, or $1.3 billion bid, which helped usher Haier out of the bidding war two days later.
Maytag declined Whirlpool's first offer, then a few days later the company decided to entertain the bid from its rival. Whirlpool then began the due diligence process with Maytag by going over its books as a preliminary step toward making an official bid on the company. Whirlpool's second bid was $18 per share and finally the company placed an offer of $21 per share, or $1.7 billion, on the table. Maytag set the stage for its merger agreement with Whirlpool by backing the third offer on Aug. 18. — Additional reporting by Alan Wolf
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