Whirlpool's acquisition of Maytag was probably the single biggest event in the global appliance industry in 2006. It made Whirlpool – already one o the biggest appliance makers in the world – even bigger.
Who's No. 1?
There has always been ambiguity in which company – Electrolux or Whirlpool – could lay claim to the title as the world's biggest appliance company, primarily because much of Electrolux's output came from its outdoor power equipment business.
Whirlpool acquired Maytag on March 31, 2006. Electrolux spun off its outdoor power equipment unit and the new Husqvarna Group began trading shares on June 13, 2006. Those two events clear the picture somewhat. When you look at the bottom line—total revenues—Whirlpool emerges as the biggest appliance maker in the world.
The Maytag Drama
The Maytag acquisition started in Mid-2005, and Whirlpool wasn't even a part of the picture. Investment group Ripplewood Holdings LLC made a cash merger of U.S. $14 per share, and the Maytag board of directors quickly approved the deal and recommended it to shareholders. Within weeks, there were rumors of other interested buyers, including Private Equity Firm The Blackstone Group and China's biggest appliance OEM, Haier. Haier eventually did make an offer, then raised the offer a week later. Ripplewood balked at making a higher bid, but the board still planned to recommend its offer over Haier's and the vote was scheduled…
Finally, Whirlpool stepped into the picture. Within days Haier officially pulled out. When Whirlpool upped its offer, Maytag's board changed turned away from the Ripplewood offer.
By the beginning of 2006, the business of clearing the hurdles to the Whirlpool/Maytag merger were underway. The biggest hurdle would be the official OK from the U.S. Department of Justice (DOJ) Antitrust Division.
But there were signs of potential troubles. Antitrust watchers said the combination of the companies would give them too big a share of the U.S. laundry appliances market. In Iowa, Senator Tom Harkin (D-IA) and Congressman Leonard Boswell (D-IA), eager to protect the Maytag jobs in their home state, called the merger to be blocked. As the March 30th deadline neared, and even as the Canadian government gave its clearance to the merger, the media reported that U.S. DOJ Antitrust Division attorneys were busy gathering evidence about the impact of the merger on competition, ostensibly to be used to create a case against the merger.
Some industry watchers speculated that the DOJ would, at the least, demand the sell-off of some portion of the laundry appliance business.
Then, on March 29 of this year, everything fell into place. The DOJ approved the merger with no conditions.
Whirlpool Speaks to APPLIANCE magazine
Just hours after the official clearance from Washington, on the evening of the 29th, APPLIANCE magazine Editor Tim Somheil spoke to W. Timothy Yaggi, Whirlpool's executive vice president, Market Operations.
"We expected the decision by the 30th," Yaggi told APPLIANCE. "I would say we're very pleased." Yaggi said no further obstacles remained and the merger would occur within days—and within 48 hours the paperwork had been filed, and Maytag and Whirlpool became one company.
"Up until now we've been competitors, so we have not been able to see a lot of Maytag's sensitive data," Yaggi told APPLIANCE. "We're looking forward to better understanding their business and their performance."
Until Whirlpool and Maytag have really shared their data, he said, they couldn't make concrete plans. Reducing overlapping operations will take time, but clearly key to the success of the merger. "We can generate $300 to $400 million in savings annually by the third year. That will allow us to re-invest and increase our investment in innovation and brand-building," Yaggi told APPLIANCE.
Pipeline Of Innovation
"We are very confident that we can leverage the pipeline of innovations that we have worked very hard to create," Yaggi told APPLIANCE. "We think we have $3 billion or more in ideas in our innovation pipeline that can be applied across a broader portfolio of brands. Therefore we think we can bring more innovation to Maytag, to Jenn-Air, to Amana than they've had in the recent past and reinvigorate those brands."
But cuts were inevitable, and in May 2006 the first restructuring steps were announced. As Iowans feared, this entailed big job losses in the hometown of Maytag, Newton, Iowa. Headquarters and R&D operations in Newton would be closed, as would administrative offices in Illinois, U.S., Canada and Mexico. Maytag laundry plants in Newton; Herrin, Illinois, U.S.; and Searcy, Arkansas, U.S. would close, production moving to Whirlpool laundry factories in Clyde and Marion, Ohio, U.S. Approximately 4,500 positions will be eliminated as a result of the closures.
However, Whirlpool is creating new 1,500 positions at other locations. Whirlpool has manufacturing expansion projects underway in Clyde, Ohio, and Marion, Ohio, and expects them to be up and running at the start of 2007.
The Amana plant in Amana, Iowa, is also being expanded to accommodate more bottom-freezer refrigerator production. Whirlpool even added 400 jobs in and around its headquarters in Benton Harbor, Michigan.
Another restructuring stage was announced in October, when Whirlpool said it would expand manufacturing in Ramos Arizpe, Mexico, and , in 2007 and 2008, reduce its output and work force in Fort Smith, Arkansas, U.S., and in Evansville, Indiana, U.S.
Well before the merger, Maytag was expressing its dissatisfaction with its loss-making Hoover floor care appliances business. Whirlpool said early on it would probably sell off the business, along with Maytag's commercial business. The Amana commercial microwave business was sold in September to the United Kingdom's Aga Foodservice Group Plc, for $49 million. Aga will continue manufacturing the fast food restaurant microwaves in Whirlpool's Amana plant for as long as 2 years.
On October 24, Whirlpool divested Dixie-Narco, Inc., Maytag's can and bottle vending machines company for $46 million in cash. Dixie-Narco went to vending machine OEM Crane Company, just days before the vending industry's biggest U.S. event, the NAMA National Expo.
Still on the block are Hoover, Maytag's floor-care business, and Jade, Maytag's premium commercial and commercial-style residential cooking appliance business.
On Oct. 24, 2006, Whirlpool also announced record net sales in the third quarter, with sales up 35 percent from the previous year. Even without Maytag factored in, net sales were up about 8 percent.
Maytag Integration: "All phases announced"
“The integration of Maytag continues to progress well at an accelerated pace and is proceeding as expected,” said Jeff M. Fettig, Whirlpool's chairman and chief executive officer as he announced third quarter results. “To date, we have announced all phases of business integration necessary to realize our previously communicated efficiencies.”
Fettig added: “Our integration plans remain on track and we fully expect to deliver efficiencies in line with our previous guidance of greater than $400 million in 2008."
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