Chicago Tribune

CHICAGO – Maytag Corp.’s board, reversing its earlier stance, declared Whirlpool Corp.’s risky but richer $21-a-share buyout proposal to be superior to the $14-a-share bid that Maytag earlier accepted from a private investment group.

The Newton, Iowa, company’s move late on Friday appears to put Whirlpool’s $1.7 billion bid in the lead as the fight over Maytag moves into its final stage. But Whirlpool hasn’t won yet.

The contest for Maytag began in May, when an investor group led by the New York leveraged-buyout group Ripplewood Holdings offered to buy the company for $14 a share, or $1.11 billion.

Maytag’s board accepted the bid, scheduled an Aug. 19 shareholder meeting to vote on the buyout and urged shareholders to vote in favor of the Ripplewood transaction.

Then things grew more complicated.

As part of the buyout accord with Ripplewood, Maytag had permission to seek higher bids for 30 days. During that time, Maytag officials and investment bankers contacted three dozen potential buyers, but found no takers.

Maytag had never contacted U.S. appliance-industry leader Whirlpool, however.

Federal regulators routinely review corporate mergers to make sure marketplace competition won’t be damaged, and Maytag executives apparently assumed a combination of the nation’s number-one and number-three appliance companies would never pass regulatory muster.

Despite the snub, Whirlpool in July launched an ardent pursuit of Maytag. When its initial $17-a-share bid was rebuffed by Maytag’s board, the Benton Harbor, Mich., company raised its tentative bid to $18, then to $20 a share, and finally on Monday boosted the offer price to $21, or $1.7 billion.

Even as Whirlpool bid higher and higher, however, Maytag’s board continued to stick to its recommendation that Maytag stockholders vote in favor of the Ripplewood offer. (To be sure, the probability that the stockholders would follow the directors’ advice and vote to settle for $14 grew smaller every time Whirlpool raised the ante.)

But after the stock market’s close Friday, Maytag disclosed that directors decided to change course. The directors determined it would be “inconsistent” with their duty to stockholders to continue backing the New York group’s offer, Maytag said.

Stockholders must still vote the $14-a-share measure up or down, but the board “now recommends a vote against” the Ripplewood deal, the Iowa company said. Maytag also pushed the date of the vote back to Aug. 30 from Aug. 19.

Even though Whirlpool’s bid tops Ripplewood’s by a whopping 50 percent, there had been a real question as to whether Maytag’s board would approve it.

That’s because it’s far from certain that the government will sign off on the deal. If the regulators do block the transaction, Whirlpool has agreed to pay Maytag $120 million in a “reverse breakup fee” to compensate the target company.

Critics, however, say $120 million won’t cover the damage: Maytag’s financial health, they contend, is eroding so fast that the company may not be viable as an independent entity months from now, when the Federal Trade Commission finally completes its review.

Ripplewood, led by LBO specialist Tim Collins, declined comment Friday. The New York company has the right to make a counterproposal, or to alternatively declare that Maytag has broken the original agreement – which would allow Ripplewood to collect a $40 million breakup fee.

Whirlpool has agreed that if that happens, Whirlpool will pay the $40 million Maytag will owe Ripplewood.

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(c) 2005, Chicago Tribune.

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AP-NY-08-12-05 1906EDT