ApplianceAdvisor
MAYTAG Acquisition
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MAY 2005
Maytag
Chooses to Embarrass ApplianceAdvisor
When Amana was withering we predicted Haier would buy, and as Maytag kept
throwing balls into the gutter we predicted Samsung or Haier (see below)......but
Nooooo, Maytag CEO Hake has obviously chosen to be acquired for
$1,130,000,000.00 ($2.1 billion when including assumed debt) by the equity firm Ripplewood Holdings
in a petty attempt to
embarrass ApplianceAdvisor.com.
So what does this actually mean to Maytag and the appliance industry.
How will Maytag benefit? What can
Ripplewood do that Maytag couldn't do for themselves? There
must be more than outsourcing in the cards.
Perhaps:
Efficiency/Synergy: Ripplewood has no other appliance holdings so there are
no obvious (to us) efficiency opportunities such as merging the back
office, or combining two dishwasher lines.
Increased Sales: Ripplewood folks live in the Hamptons so
don't have the skills to fold socks, much less any particular appliance expertise
to positively affect sales. The great margin suck, sales incentives, could be used to fill the
factories in the short term, but there's no skill there. How about
globalization, but that's
hardwork and takes years and lots of cash if one wishes to build without
acquisitions.
Credit/Liquidity: Ripplewood, with what we would guess to be
their swank high falutin New York address, with its wall sconce lighting
fixtures, dark hues, those spiffy new leather exec chairs, cotton towels
in the bathroom, a
$45,000 solid mahogany conference table with a hidden telescoping video
conferencing system, a complete working environment free of the normal
compliment of office idiots, yet staffed by type-A folks with good hair .....all
of this will go far to calm the
fears of lenders and investors.
An old Ripplewood release for an automotive acquisition might give some
clue to the plan:
"As with every investment, Ripplewood will support the portfolio
company management team with knowledgeable Industrial Partners - in this
instance Industrial Partners who have extensive experience in the
automotive industry. Ripplewood is a pioneer of the Industrial Partner
method of investing in which the firm forms partnerships with world-class
operating executives with extraordinary business experience to acquire
businesses in targeted industries and pursue pre-defined strategies to
enhance the value of these businesses."
Our final forecast
Evolution: Ripplewood has a staff of 45 in New York and Tokyo managing $12
billion invested in several different industries. They do not now
nor ever will have a clue about appliances, nor the time or inclination to
care. These are big picture folks. Though the strategy could
be simply to cut, slash, and burn it is our uninformed opinion that
"Synergy" is what they're after. If none exist today, look
for follow-on global acquisitions to make sure there are Synergistic
opportunities in the future. Analysts have suggested that Maytag can have a
washer delivered to Newton, IA from Asia for less than they can make it
themselves. Synergy is not another word for job retention.
Newton is going to be one stressed out place to be this year.
Revolution: There is the very FAR outside chance that
Ripplewood is planning a "Paradigm Shift", a reordering of the
rules of appliance competition. Changing the foundation on which the
industry is built, be that:
-Manufacturing: perhaps a Dell build to
order system, or a coordinated global sourcing concept in which Maytag
leaves manufacturing entirely, but gets deep into the pants of its
suppliers.
-Distribution: dump the dealers, sell
direct?
-Sales: leasing and not selling appliances
with a new
unit installed every 5 - 7 years, or a Dell direct sales concept
where orders are taken over the phone or by the internet at huge
saving....or maybe a "Tupperware Party" for appliances where
home owners earn commissions when they sell to friends.
-Promotion: A Maytag credit card to earn
points towards the purchase of a Maytag appliance.
No....we don't think anyone has the cahones either.
Will anyone make a competing bid? That would be fun.
JUNE 2005
Newton
(Iowa's) First Law of Motion: A Body in Motion Tends to Stay in
Motion
It is bedlam here at ApplianceAdvisor HQ, as the staff is high fiven,
moon walking, and dementedly giggling over reports that Maytag remains in
play! Baby! Let the games begin.
Reuters is reporting today (June 13) that Ripplewood may have competition
for the Maytag family jewels. New bidders for Maytag include the
private equity firm the Blackstone Group plus two additional un-named
equity groups as well as an un-named Corporation (we guess Samsung, but
for all we know it's Boeing).
As the battle of the well-coiffed Wall
Street-Urchins begins, we will be watching and reporting, and eating
Twinkies through our all-nighters.
UDPATE: June 14:
A source tells us that
the un-named Corporation is Haier, the Chinese brand steam rolling the
bottom of the market. This Update is unconfirmed and possibly
wrong. If Ripplewood was not insane in their original assumptions,
Haier may very well be able to rationalize a higher Haier bid based on
Maytag's distribution, brands of Jennair, Amana, and Maytag, and overall
synergy. Ripplewood may want "synergy", but Haier would have it on day
1.
UPDATE: June 14:
Haier was reached but would not comment on this update.
UPDATE: June 14:
A second source points to Haier, but with a
minimum of 4 degrees of separation
from Haier, we are still in unconfirmed rumorworld.
UPDATE: June 15:
CONFIRMATION: Reuters confirms that
Haier is interested in acquiring Maytag
http://biz.yahoo.com/rb/050615/manufacturing_china_haier.html?.v=3
UPDATE: June
17:
Reuters reports that Haier is still undecided, but in touch with
Maytag as the June 18 deadline looms.......but this is of course
meaningless. Why signal the market in advance of the offer?
Further, June 18 is not really a deadline. It is the last day that
Maytag can actively solicit offers, and the last day Maytag can back out
of its Ripplewood deal without incurring a $40 million breakup fee, (2% of
Maytag's current value). Maytag will still accept unsolicited offers
for months to come.
UPDATE: June 21:
Reuters reports that the games are in full
swing. Haier, in conjunction with Bain Capital and the Blackstone
Group have made a $16/share offer for Maytag ($2 more than Ripplewood's
anemic $14 offer). It is our humble opinion that Ripplewood cannot
beat Haier without the immediate entry of an international appliance
partner (such as Samsung). Ripplewood, so far, has brought nothing
to this party except good hair and pretty offices, while Bain and
Blackstone actually have a solution to all of Maytag's problems within
their proposal (except what all those people in Newton will do for a
living). Today has been a pretty good day for Whirlpool stock, but
hell if we know why. The Haier solution will wreak havoc on the
industry price structure.
http://www.nytimes.com/reuters/news/news-manufacturing-china-haier-bid.html
UPDATE: June 24:
Interesting analysis from TheStreet.com
UPDATE: June
30:
Ripplewood is signaling that it is bailing out of its bid for
Maytag, and wants the $40 million "break-up" fee. Sitting
in our office with "zero" information, we are guessing the
following happened: Ripplewood has spent the last 2 weeks
frantically feeling out potential partners to save the deal, perhaps Fagor,
maybe Samsung, and other international manufacturers, but not one bite. Did Maytag's supplier Samsung, which knew most about Maytag's
assets, liabilities, people, costs and potential, also pass on the
offer? Accepting failure, but never loss, Ripplewood is exiting
stage left, but with hopes that the departure is through gold gilded gates, ala Gordon Gekko of "Wall
Street". One more perfectly acceptable reason to hate people
with good hair.
JULY 2005
UPDATE: July 6:
Financial Times reports, that under
testicular pressure from Ripplewood, Maytag is now threatening to cut
short to 2 weeks Maytag's assistance to Haier's due diligence, which Haier
estimates will require 6-8 weeks. Does one get the feeling that
Maytag's executive staff is out of its class or are they voting for the
job security of the Ripplewood-peckers and their industry ignorance?
How is it that Maytag turned down a $23 offer from Ripplewood in December,
only to accept a $14 offer from Ripplewood in May, only to be bullied by
Ripplewood into backing out of support of Haier's 14% premium bid simply
to ward off paying a 2% break-up penalty to Ripplewood. Is
Ripplewood playing Maytag with the old bird in hand game, threatening to
back out of the deal, before Haier will be in a position to make an
offer? Is Maytag effectively paying the difference, 14%-2% = 12%
or $240,000,000 (correction
$157,000,000) for the security of a done-deal? If I were a Maytag
shareholder, might I be sharpening Pikes suitable for cranial
displays? It's still early and there are plenty of Twinkies left.
NOTE: We gather from the many different descriptions of the Haier
$16 "offer", that if it's a formal offer, it comes with escape
clauses, perhaps predicated on a happy result to the due diligence.
http://news.ft.com/cms/s/c3124d3a-edbb-11d9-9ff5-00000e2511c8.html
UPDATE: July 7:
The freak show begins. Maytag
is being sued by a New York-based investment advisor allegedly for
inflating profit forecasts so as to artificially increase share
value. We are coming to the conclusion that Maytag is not smart
enough to do this. The suit is seeking class action status for
buyers of Maytag stock between March 7 (>$15) and April 27
(<$10). If we could be practical for a moment, what does this
advisor have to gain from cutting off Maytag's legs in the midst of the
negotiations, particularly when Maytag's alleged stock plan is working
(stock at $16 yesterday)? One must assume that no matter what the
profit forecasts are, Ripplewood has had plenty of time to confirm the
basis of its $14 bid to its satisfaction. We are dazed and
confused. Are there any clues out there?
The Des Moines Register article below best explains the motivations of the
investment advisor.
http://money.cnn.com/2005/07/07/news/fortune500/maytag.reut/index.htm
http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20050706/BUSINESS/507060344/1029/archive
UPDATE: July 11:
Yada yada yada, Maytag says July 7 charges are without merit, Yada yada yada
UPDATE: July 15:
Maytag has moved up the shareholder
vote on the Ripplewood offer to August 19, while Haier has not yet made a
formal offer, Reuters reports that Maytag will mail a definitive
proxy to shareholders on July 20, 3 business days from today. Is the
Proxy mailing a door closer to a Haier takeover? Dunno.....but we
keep watching.
UPDATE: July 17:
Whirlpool proposes a $17 share offer for Maytag, far above the
current $14 offer from Ripplewood. While we have no idea how the
Maytag executives intend to sabotage this offer, to date they have been
diligent in seeking the lowest possible price. Does Whirlpool intend
this offer simply to grow through acquisition? Were you born
yesterday? Wouldn't Whirlpool rather buy Viking, or Sub-Zero or
Dacor or even Danby? Dah! Whirlpool would rather get kicked in the head by a
mule, or dragged through broken glass, or....well you get the picture,
then be in on this deal. No, they are making this offer kicking and screaming. This proposal
is a purely
defensive move to slow down the Haier juggernaut, to bottle up dealer
floor space, and to take invaluable brands off the table.....as if
Whirlpool needs more uncompetitive US production capacity, NOT. The
accountants did the math and concluded that $2.3 billion + $x billion in
factory closing costs, layoffs, and the related costs of plowing Newton,
Iowa into the ground is all cheaper than competing with Haier mano a mano
on every floor in every dealer by January 1. One might conclude from
this offer that Whirlpool is not confident in its own ability to fend off
Haier.....so let's not all be popping the champagne corks.
UPDATE July 20:
Haier drops out of the Maytag buyout. Analysts are saying that Haier
did not have the juice to raise their bid. The weenies at Maytag are
still sticking with Ripplewood and are on track to give up the $17/share
offer, a $440 million (correction $240
million) premium from Whirlpool. Will Ripplewood destroy the brand
as Goodman did to Amana, or will they whore it out as the Malaysians did
with "Singer" of sewing machine fame. Whirlpool has to
worry about the whoring option number 2.
And what about Haier? The Ripplewood folks certainly are not
qualified to run the thing, and they may think better of what they bought
once they buy it. Is Haier considering subsidizing Ripplewood and taking a
second albeit a smaller bite of the apple for say the "Amana"
brand? We thought Haier should have picked up Amana the first time
but if they do so now, you heard it here first. By the way, we got
nothing, so don't go and invest your mother's methadone money.
UPDATE July 21:
Maytag board backs lower bid from Ripplewood. Of course they do, we told you
that they would 4 days ago.
By the way, of Maytag's 11 directors:
One is an un-indicted co-conspirator in an attempt to bribe members of the
Illinois legislature
Two are CEO's of corporations presently under investigation by the SEC
And One is the ex-Director of community outreach at U of Alabama
Maytag is in good hands.
UPDATE July 24:
Whirlpool raises bid to $18. Though the Maytag board remains officially
committed to the Ripplewood offer (currently $320 million less than Whirlpool's
bid), analysts suggest that Maytag may be trawling for a a Whirlpool break-up
guarantee because Maytag will have to send Ripplewood packing long before the
Whirlpool deal is done.
UPDATE: July 28:
Maytag and Whirlpool have reached agreement on confidentiality. Maytag
will unzip their financial records allowing Whirlpool to take the full measure
of Maytag's corporate manhood. Will they consummate or will the jilted
suitor, Ripplewood, find a way back into Maytag's heart? We don't want to
spoil the ending for you.
AUGUST 2005
UPDATE:
August 8:
Whirlpool increases its offer to $20 per
share, promises to pay $40 million break-up fee to Ripplewood and promises an
additional $120 million break-up fee to Maytag if regulators put the kabosh on
the marriage.
UPDATE:
August 11:
Whirlpool increases its offer to $21 per
share, The Maytag board finally recommends the Whirlpool bid as superior to the
Ripplewood bid, meaning that the increased Whirlpool offer is worth the risk of
regulator rejection.
ANALYSIS:
August 17:
As a global company Whirlpool
can buy steel, motors, switches, and paint for less than the hayseeds at Maytag certainly.
Is that enough for all of this? Is this still defensive, or is there
actual love here with Maytag providing some secret key to Whirlpool nirvana, or
simply, "Whirlpool Want, Whirlpool Have". We no longer
know.......but for the 3 of you still reading this......we no longer really care
anymore.
Maytag claims to have made more passes to more potential suitors than a Times
Square prostitute, but never to Whirlpool for fear of regulator rejection.
Why did Whirlpool wait until Maytag was tricking in a cheap 3rd floor walk-up
before deciding that this was love? Could Whirlpool have made an offer
before Ripplewood, before Haier, saved the cost of the cheap room ($40 million) and perhaps saved $3 a
share or did they have to wait for Maytag to dishonor itself .......thereby
winning approval from the errr, hmmmmmm hotel manager ahhh hmmm played by the
FTC? Good grief. Never mind.
UPDATE: August 22:
Maytag accepts Whirlpool's $21 per share marriage proposal, now we
must all patiently wait for a marriage license from the town clerk. Until
then the publisher of ApplianceAdvisor has demanded that the staff decamp from
the building, remove sleeping bags from the office supply closets, pick up
toothbrushes from the bathroom and socks hanging in the lunchroom. Our
janitorial service has been convinced to return us to their schedule but only
after contracting a special weekend cleanup at a cost normally reserved for
blood and organ splattered multi-homicide crime scenes. Driven by demands
from our insurance adjuster, the editor has further requested (pointedly) that
the nearly complete pizza box pyramid be demolished and that Leon's desk be
carefully removed from the peak without toppling through the lobby glass
wall.
Most of us spend our working lives knowing our colleagues only from 8 AM till 6
PM, bathed, packaged in clean clothes and suitable for public display, and this
is as it should be. In the last 3 months of the Maytag acquisition, this facade
has collapsed, opening up to everyone the entire freak show of personal hygiene
quirks, night rituals, and physical anomalies and mutations that
we each as individuals have long convinced ourselves is or are
"normal". We have peered over the edge at humanity's darkest
core and come back knowing that evolution is a work-in-progress.