Whirlpool Ups Ante Again

August 8, 2005
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BENTONHARBOR — Maytag Corp.'s board of directors has four words for corporate suitor Whirlpool: Show us the money. Giving Whirlpool less than two weeks to perform due diligence research, Maytag's board managed to elicit a firm offer Monday from the Benton Harbor-based appliance leader.

With the offer comes a yet-again increased purchase price — Whirlpool formalized its acquisition bid with a $20-per-share offer. The upped buyout price would amount to more than $2.6 billion, including the assumption of nearly $1 billion in Maytag debt. The deal also includes $175 million in conditional agreements, including Whirlpool's willingness to pay $40 million to settle a tentative Maytag buyout agreement with another firm and an agreement to pay Maytag $120 million if federal regulators nix the Whirlpool deal (an eventuality considered highly unlikely by Whirlpool CEO Jeff Fettig).

With the newest Whirlpool offer nearly 43 percent higher than the only competing bid, it would appear that before long the Maytag Repairman will be packing his bags for southwest Michigan. However, looks can be deceiving.

The Maytag board has been a bit wishy-washy in considering Whirlpool's buy-out bid from the start. When Whirlpool made an unsolicited offer of $17 per share last month, the response from Maytag's board was lukewarm at best. Although the standing offer from private equity firm Ripplewood Holdings is only $14 per share, the board showed no inclination to accept the higher bid. Frustrated with Maytag's hesitance, Whirlpool upped its bid to $18 per share and included provisions to pay any "reverse break-up fees" associated with backing out of the deal with Ripplewood. That was enough to encourage Maytag's board to say that Whirlpool's proposal "may reasonably be expected to lead to a transaction that is financially superior to Maytag's pending transaction …  and that is reasonably capable of being completed." On July 27, the two firms entered a confidentiality agreement that opened Maytag's books to Whirlpool's accountants and attorneys.

In light of the sweetened Whirlpool offer, analysts suggested that the Maytag board would change its recommendation on the Ripplewood deal. So it was no surprise on Aug. 2 when Maytag filed with the SEC a revised letter to shareholders. The letter reminds investors of the Aug. 19 shareholders meeting at which they will be asked to vote on the buy-out proposal from Ripplewood (aka Triton Acquisition Holding). However, the letter goes on to remind investors that the "Board of Directors has recommended that stockholders vote FOR the merger providing for the acquisition of Maytag by Triton Acquisition Holding Co."

But what about Whirlpool? Didn't the board indicate that the Whirlpool offer looked promising? To learn about that, shareholders must grab their magnifying glasses and read on.

Several paragraphs below the board's recommendation is a section entitled "Adoption of the Merger Agreement," which brings shareholders up to date on the recent happenings with Whirlpool. In several hundred words of legal jargon, the statement implies that the board is not yet thoroughly impressed by Whirlpool's offer. If Whirlpool were to submit a firm offer that the Maytag board deemed "a superior company proposal" to that offered by Ripplewood, Maytag would release Whirlpool from the "standstill" terms of the confidentiality agreement, graciously allowing Whirlpool to "(modify) the terms of such proposal on one or more occasions to increase the value of the per-share consideration to be received by the company's shareholders."

Now that Whirlpool has raised the bar yet again, the Maytag board may come around. With over a week until the shareholders' meeting, the board could issue another revised letter to investors with an altered recommendation — this time suggesting that the shareholders vote to nix the Ripplewood deal. But even if the Maytag board's game of hardball doesn't result in a turn-around recommendation, the Ripplewood deal may still be voted down on simple arithmetic: $20 per share is simply better than $14.

Whirlpool's offer is set to expire on Aug. 20, the day after the Maytag shareholders' meeting.    

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