Maytag Corp., reporting a bigger loss for the fourth quarter on Friday, said it is seeking permission from its prospective buyer Whirlpool Corp. to sell its Hoover floor care and vending machine businesses.
Maytag, the nation’s third largest appliance maker, announced it would sell Hoover, a widely known international manufacturer of vacuum cleaners and numerous other floor care products that it has owned for about 16 years. Floor care sales dropped 20 percent in the fourth quarter compared to a year ago and 8 percent for the full year, said Maytag CEO Ralph Hake in a conference call with analysts.
“We can no longer carry the burden of this underperforming product line, so we’re now exploring other strategic options including the sale of our floor care business,” Hake said.
Maytag bought Hoover in 1989 in a $1 billion deal, three years after acquiring Magic Chef which included the Dixie-Narco vending machine subsidiary, another business Hake said will be sold.
Whirlpool has the right to approve the sale of Maytag assets as part of its deal to acquire Maytag, Whirlpool CEO Jeff Fettig said in a statement.
“Whirlpool looks forward to reviewing any proposals Maytag may present, within the framework of our merger agreement,” he said.
Both companies still expect the deal to close in by the end of next month.
Maytag lost $75 million, or 93 cents per share, in the October-December period versus a loss of $14.1 million, or 18 cents per share, in the prior-year period. The recent results included hefty charges, including 32 cents per share for restructuring manufacturing operations, which included closing a washing machine factory in Florence, S.C.
Hake said additional plans to return the company to profitability include closing underused factories, a problem worsening as the company relies more heavily on parts and appliances made in lower cost countries.
“We’re selling more of our sourced products and less of our manufactured products,” he said.
He suggested more laundry plant closings are coming.
“Reducing the burden is a necessary fix to correct our profitability and can be achieved, but not all at once,” Hake said. “We will move as rapidly as possible to get these strategic moves behind us.”
“I am extremely disappointed that our positive sales gains in major appliances were more than offset by our overall high cost structure and poor floor care performance,” Hake said.
Asset and goodwill impairment charges totaled 17 cents per share, while merger-related expenses were 13 cents per share.
Sales rose to $1.24 billion from $1.16 billion in the year-earlier quarter, helped by a 7 percent rise in sales of home appliances, driven by refrigeration products.
For the full year, losses widened to $81.9 million, or $1.02 per share, from $9 million, or 11 cents per share, in 2004. Annual sales increased to $4.9 billion from $4.72 billion in 2004.