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Posted on: Saturday, May 21, 2005

Analysts question offer for Maytag

By William Ryberg and Donnelle Eller
Des Moines Register

NEWTON, Iowa — Shares of Maytag Corp. rose yesterday above the price offered by a New York suitor, suggesting that shareholders expect a sweeter deal.

Maytag's cash agreement to be bought by Ripplewood Holdings LLC for $1.3 billion may speed cost-cutting measures.

Associated Press library photo • September 2004

Analysts expressed surprise that Maytag, the nation's third-largest appliance maker, accepted the offer of $14 a share from Ripplewood Holdings of New York. They also questioned whether shareholders would accept the deal, which was announced Thursday.

J. David Hunger, a professor of management at Iowa State University who has studied Maytag, said the $14 price made it seem "like the investor group is going to get a steal."

The proposed purchase, subject to shareholder and other approvals, would pay stockholders $14 for each of their shares and would turn Maytag into a privately held company.

Shares, closed yesterday at $14.40, up $2.84 from Thursday's close of $11.56 and 40 cents above the buyout price.

The result: If the deal goes through, anyone buying shares at $14.40 risked losing money on the buyout.

Laura Champine, an analyst with Morgan Keegan, said the $14-a-share offer could bring out a rival bidder, such as another appliance manufacturer, offering a higher per-share price.

Champine believes Maytag is worth at least $17 a share, and noted that the stock has rarely traded below $15 in the past 15 years. She declined to name any potential rival bidders.

Cleveland-based analyst Eric Bosshard at FTN Midwest Research Security Corp. said a rival, such as the South Korean companies Samsung or LG Electronics, could be a buyer.

"This was a $20 stock not that long ago, so I can certainly understand why the market believes there could be another offer," Bosshard, who rates the stock a "buy," told Bloomberg News.

" ... But the challenge is there's a lot of work to be done at Maytag."

Shares were trading at about $21 at the start of the year but fell as Maytag's problems multiplied, with falling sales and profits and plans for another in a string of costly restructures.

The stock was trading as high as $15 in late April, before falling below $10. Shares closed at $11.56 on Thursday, only hours before the proposed purchase was announced.

Hunger, who owns a small amount of stock, questioned why the board of directors accepted the $14-a-share offer.

"The primary job of the board of directors is to fight" for the interests of shareholders, Hunger said. "I'm surprised that they're accepting a price that is so low."

Timothy Collins, Ripplewood's chief executive, said in an interview that $14 was a fair price, giving shareholders about a 50 percent boost in value, based on the stock's price in the $9.50 range.

"If we didn't think this was a proposition that was both fair and good for the shareholders, we wouldn't have made it," Collins said. "We wouldn't have done it if we thought we were getting such a great deal that somebody was going to come in and pay more. We think it's a good value proposition for the shareholders."

He suggested the stock had risen in recent days only because rumors of a pending offer had spread.

Maytag will produce a proxy statement with details about the tentative deal between Maytag and Ripplewood Holdings. The proxy will be sent to the U.S. Securities and Exchange Commission for approval and will then be sent to shareholders to help them decide on their vote. No timetable has been set so far, but Maytag has said the entire sale process could be completed by the end of the year.

Ralph Hake, Maytag chairman and chief executive, said yesterday that the company and its workers' union must come up with a cost-cutting plan in two to four months if the Newton factory is to receive any new investment from the company.

Maytag has repeatedly said the plant is its highest-cost manufacturing operation.

Hake said the company is in discussion with the union, United Auto Workers Local 997. The company, he said, wants the union to accept what he described as a "fair wage" that is competitive with those at other Maytag plants in the United States.

"We're going to try to work toward some appropriate resolution like that. It may work. It may not work out," he said.

Without new investment, the plant's workforce, now down to 1,350, can be expected to shrink even more in "a natural spiral" downward, Hake said.

Ted Johnson, president of UAW Local 997, declined to comment about the sale. "It's just wrong to speculate," said Johnson. "We're going to keep working on making washing machines and dryers.

"We build good products, and we have the capacity to build more," said Johnson, who added early Friday morning that he didn't plan on having a special meeting with members