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Maytag to support Whirlpool bid, sources say

Maytag Corp.’s board is close to formally backing an offer by Whirlpool Corp. to buy Maytag for about $1.7 billion, or $21 per share, according to a source close to the deal.
/ Source: Reuters

Maytag Corp.’s board is set to formally back an offer by Whirlpool Corp. to buy Maytag for about $1.7 billion, or $21 per share, according to a source close to the deal.

Unless an investor group led by private equity firm Ripplewood Holdings, which has an existing offer to buy Maytag for $1.13 billion or $14 per share, responds with a compelling counteroffer by 2 p.m. Friday, Maytag’s board will publicly deem Whirlpool’s offer superior, the source said.

Maytag, an American brand icon and maker of Hoover vacuums, had previously backed Ripplewood’s offer, announced in May. Even with Whirlpool raising its bid to $20 per share Monday, Maytag’s board members were still hesitant to deem it superior because of antitrust concerns associated with combining the two companies, sources say.

On Wednesday, Whirlpool raised its bid a third time to $21 per share, landing what may prove to be the knockout punch to Ripplewood, which had indicated it was willing to raise its bid by another $1.50 per share. Whirlpool also would assume nearly $1 billion in debt.

Maytag’s board, while still concerned about the antitrust risks, was ultimately swayed by the realization that Whirlpool’s offer was so much higher than Ripplewood’s that its fiduciary duty to investors trumped regulatory concerns, sources say.

Investors were betting on the higher offer, sending shares up to nearly $19 per share, or more than double what they were trading at before Ripplewood announced its offer.

Ripplewood could raise its offer Friday, a move that might throw a wrench into the board’s decision.

But several people close to the deal have said that scenario is unlikely, as Ripplewood is known for taking companies over at an affordable price.

Whirlpool, whose brands include KitchenAid and Inglis, can afford to pay more than Ripplewood because as a strategic buyer in the same industry, it can squeeze more costs out of a combination of the two.

After Friday, Ripplewood has five business days to match Whirlpool’s offer or walk away from the deal. Under terms of the agreement, Ripplewood is entitled to a $40 million breakup fee. Whirlpool has said it will pay the fee and a taxable $120 million reverse-merger fee plus $15 million for Maytag employees if the deal is blocked by antitrust regulators.

The takeover battle has been intense, with a unit of Qingao Haier, China’s largest appliance maker, and two private equity firms launching a joint $16 per share preliminary bid in late June. The Haier-led consortium bowed out of the deal July 19, two days after Whirlpool said it planned to launch a $17-per-share bid.

Maytag became a takeover target after its earnings suffered from overseas competition and high cost structures. From March 2004 to May, the stock dropped from $30 per share to $10.

Maytag and Whirlpool control about 50 percent of the U.S. appliance market share. The combined company would become the world’s largest appliance maker.

Maytag has set an Aug. 19 shareholder meeting date to vote on the Ripplewood offer. Whirlpool’s offer expires Aug. 20.

Shares of Maytag closed down 21 cents at $18.79, while Whirlpool’s stock was down 83 cents at $80.70. Both stocks have soared since the takeover fight began, with Whirlpool’s stock hitting a 52-week high of $85.50 Monday.