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Whirlpool-Maytag Merger Moves Closer

Whirlpool’s acquisition of Maytag moved closer to possible completion this month with Whirlpool’s filing of a prospectus and a proposed proxy statement for Maytag shareholders with the Securities and Exchange Commission (SEC).

The regulatory document, a Form S-4/Registration Statement, includes a prospectus to register the Whirlpool shares that would be distributed in the acquisition, and a proxy statement that discusses the terms, risks and stock implications of the merger. The prospectus and proxy statement, which also includes voting instructions, will be mailed to Maytag shareholders after they are cleared by the SEC.

Whirlpool’s president/CEO Jeff Fettig described the filing as “an important milestone in the acquisition process.” Pending antitrust clearance by federal regulators and a pro-merger vote by shareholders, Fettig predicts that the deal could close as early as the first quarter of 2006.

Whirlpool did not discuss its post-merger strategic plans within the exhaustive document, but some notable particulars did emerge, among them:

  • Whirlpool incurred $300 million in higher material, component and oil-related costs in 2004, and expects those costs to rise to $550 million this year. The company’s 5 percent to 10 percent price hikes last January have only partially offset the higher expenses, which largely stem from steeper steel and fuel costs.
  • Whirlpool is facing a potential product safety issue with as many as 3.5 million appliances that were manufactured between 2000 and 2002. The company is faulting a parts supplier for the possible safety problem, but could nevertheless incur upwards of $235 million in repair or replacement costs as a result.
  • Maytag has considered the shutdown of manufacturing plants in Newton, Iowa; North Canton, Ohio; and Florence, S.C., as indicated in a five-year, low-case scenario financial forecast by the company.
  • Whirlpool expects the merger to generate $300 million to $400 million in annual pretax savings by the third year thanks to greater efficiencies in manufacturing, marketing, procurement, logistics, research and development, and asset utilization.
  • Whirlpool will pay Maytag a termination fee of $120 million if federal regulators determine that the merger is anticompetitive and block the deal.

On the latter point, another milestone was passed with the selection of the U.S. Department of Justice to consider possible antitrust implications of the merger as dictated by the Hart-Scott-Rodino act.

Traditionally, lawyers from the Justice Department and the Federal Trade Commission negotiate over which government agency gets jurisdiction over a particular case. The wrangling is believed to intensify with higher profile cases. The assignment of the Whirlpool-Maytag matter to Justice clears another federal hurdle for the deal as the proposal winds its way through the regulatory process.