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Haier Group bids US$1.3bn for
Maytag
BEIJING - China's
leading home appliance maker Haier Group has made
a bid to buy Maytag, the third-largest appliance
maker in the United States, for US$1.28 billion.
Maytag has received preliminary non-binding
proposals from Haier America Trading LLC, private
equity companies Bain Capital Partners LLC and
Blackstone Capital Partners IV LP, the US company
announced Tuesday on its website. But Haier Group
did not give any response.
According to
Maytag's announcement, the consortium offered to
acquire all outstanding shares of Maytag for US$16
per share cash, higher than the previous bid by
Ripplewood Holdings LLC. On May 19, Maytag had
agreed to be acquired by an investor group led by
Ripplewood for US$14 per share cash. Maytag's
stock has been traded above US$14 a share since
May 20 amid speculation it would receive a higher
bid.
The Newton, Iowa-based company, which
has 79.7 million shares outstanding as of April 2,
said it is considering the proposal. "We continue
to support the Ripplewood transaction; however, we
also believe that it is incumbent on us to pursue
this possibility of achieving a higher price for
our stockholders," said the company's lead
director Howard Clark.
With a history of
more than 100 years, the appliance maker is worth
$4.7 billion and offers a full range of products,
including washers, dryers, dishwashers and
refrigerators under the brand names Maytag, Hoover
(for vacuum cleaners), Jenn-Air, Amana,
Dixie-Narco (for vending machines) and Jade. The
company's "Maytag repairman" character, invariably
depicted as having nothing to do because of the
machines' reliability, is an icon in the US
advertising world. But Maytag ran into trouble in
recent months because of rising raw material
costs, increasing competition and shrinking market
share.
"Haier is looking for a new way to
achieve its globalization," said Lu Renbo, an
industry expert from the Development Research
Center of the State Council. Previously, Haier
expanded overseas through product exports and
establishing manufacturing bases abroad. "The
purchasing of a local, big name company may be the
best and the fastest way for Chinese home
appliance makers [to expand globally]," Lu said.
With its established brand name and,
especially, well-developed marketing and sales
networks, the purchase of Maytag would give Haier
an edge in the US market. Haier considers the US a
key market and started local production in the US
in 2000, producing 500,000 refrigerators a year at
a South Carolina production facility. Haier's bid
for Maytag follows other big Chinese companies
which have looked to boost their presence in the
US market through mergers and acquisitions. Most
famously, leading domestic PC maker Lenovo bought
IBM's unprofitable PC business for $1.25 billion
last month. It was also reported that China
National Offshore Oil Corp offered $20 billion for
US oil major Unocal.
"But companies like
Haier need to consider carefully the risk of a
foreign acquisition," Lu warned. Haier's business
is still small compared with multinational
companies. Its competitiveness lies in
manufacturing ability, but it is short of capital
and technological innovation. "All this may cause
invisible risks in its future performance after
acquiring loss-making or even debt-driven big
foreign companies," Lu said.
Chinese home
appliance maker TCL has provided a typical example
of the risks of overseas M&A strategies. The
domestic giant lost money after buying the
loss-making TV business from French company
Thomson last year.
(Asia
Pulse/XIC) |
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