updated 3/17/2006 7:17:31 PM ET 2006-03-18T00:17:31

Shares of Maytag Corp. and Whirlpool Corp. fell Friday as industry analysts and antitrust attorneys speculated that a federal government challenge to the proposed merger was coming.

Benton Harbor, Mich.-based Whirlpool has proposed a $1.79 billion acquisition of rival Maytag.

The U.S. Department of Justice antitrust division sought an extension of time to review the merger last month. The companies have agreed not to close the transaction before March 30.

A leading antitrust lawyer said a decision is likely to come next week.

The heightened speculation drove stock prices for both companies lower Friday. Maytag shares dropped $1.23, or 6.9 percent, to close at $16.71 on the New York Stock Exchange. Whirlpool shares fell $1.29, or 1.5 percent, to $86.25.

Steven C. Sunshine, a supervisor of the DOJ’s antitrust division’s merger enforcement program from 1993-1995, said antitrust attorneys have expected the government to challenge the deal because it concentrates so much power in one company.

“I think this is a merger that on true antitrust principles raises real concerns,” said Sunshine, who is now head of the antitrust practice at the New York law firm of Cadwalader, Wickersham & Taft.

The merger would create a company producing half of the dishwashers in the United States and more than 70 percent of its clothes washers and dryers. Under long-standing federal guidelines, a rise in market concentration of that magnitude would usually draw a court challenge.

Antitrust attorneys have sought sworn statements from business rivals and customers as they review the proposed deal, which received the approval of Maytag’s shareholders in December, The Wall Street Journal reported Feb 13.

Gina Talamona, spokeswoman for the DOJ declined to comment Friday, and would only confirm that the merger is still under review.

The Competition Bureau of Canada, an independent law enforcement agency, concluded on Tuesday that it had no grounds upon which to challenge the proposed merger under Canada’s Competition Act.

Sunshine said it appears the U.S. Department of Justice antitrust staff has made a recommendation to challenge the merger to Tom Barnett, who heads the division. Barnett will make the final determination about whether the government challenges the merger in court.

If it does, the companies have the option of fighting a lengthy court battle, abandoning the deal or agreeing to sell off parts of the business to allay government concerns.

If Whirlpool chooses to walk away, it must pay the Newton, Iowa-based Maytag $120 million.

Prudential Equity Group analyst Nicholas Heymann said he believes the DOJ will oppose the merger “based on the potential for anticompetitive pricing by the merged entity.”

In a March 17 research note to investors, he speculated that the merger only makes economic sense for Whirlpool if the company increases the price of some washers and dryers to help boost profits.

A Whirlpool spokesman didn’t immediately return calls Friday. CEO Jeff M. Fettig said Tuesday that the merger “will result in better products, quality and service, as well as cost efficiencies, which will enhance our ability to succeed in the competitive global home-appliance industry.”

A Maytag spokesman declined to comment.

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